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Home Financial Banking Lloyds Banking Group could defy Coalition austerity
Lloyds Banking Group could defy Coalition austerity PDF Print E-mail
Written by Gary Howes   
Wednesday, 30 June 2010 14:28
ShareScope looks at the major UK banks and advises investors that the sector offers real value.

Lloyds Banking Group (LON:LLOY) is said to the standout banking stock on the FTSE 100 according to ShareScope, the investment software providers.

ShareScope (>> Visit ShareScope for full report) commissioned Shares Magazine to write a comprehensive 2500-word report on the UK Banking sector and at 54p Lloyds Banking Group is said to offer a perfect buying opportunity.

"The company's share price performance should be driven as much by its internal turnaround as external growth. On that basis, it should prove resilient even if the UK economy stagnates in the wake of the austerity measures being introduced by the Conservative/Liberal Democrats coalition government," reads the report.

Two tier banking sector


The ShareScope report say there are three tiers that investors are faced with when approaching the UK banking sector:

i) UK focused banks of which RBS and Lloyds Banking Group which will be sensitive to UK economic recovery and
ii) Banks that are likely to be heavily influenced by the performance of emerging economies. Standard Chartered, HSBC Holdings are the standout stocks here.
iii) Barclays offers exposure to investment banking earnings.

However the report suggests Barclays (LON:BARC) should be approached with caution as regulation being mooted in the US and the UK is likely to hit their earnings hard.

Lloyds Banking Group


The domestic-facing bank should benefit from its internal turnaround even if the UK economic recovery stalls in the face of austerity measures introduced in the recent emergency budget.

"Any rebound in the group's earnings power is not likely to be driven in the medium term by revenue growth but by a reduction in costs and falling impairments. Consensus forecasts suggest the group will record earnings per share (EPS) growth of 561% next year, albeit from a very depressed base," says the report.

The first three months of 2010 saw the company return to profit for the first time since it merged with HBOS in September 2008.

"The improvement was largely due to a significant fall in bad debt provisioning.

"August's interim numbers should reveal a continuation of this trend, already recognised by agency Standard & Poor's, which recently raised its credit rating for Lloyds' core UK bank subsidiary from BBB to BBB+," says ShareCast.