Lloyds Banking Group PLC

Lloyds Banking Group PLC (LON: LLOY) is listed on FTSE 100 index. It offers a variety of banking and financial services in the United Kingdom and globally.

The ex-dividend date for the final dividend is 7 April 2022.

Investment Rationale – SELL at GBX 49.07

• Profit Booking: LLOY’s stock price has given a decent run since our last coverage and surpassed the R2 levels (resistance), and thus, investors can evaluate profit booking as per their risk-return profile.
• Balance Sheet Position: LLOY recorded a decline in loan to deposit ratio and risk-weighted assets at the end of FY21 versus FY20.
• Gloomy Outlook: The year 2022 is expected to be the year of inflation, Central Bank tightening, Ukraine war crisis, and wage pressure. All these factors can hurt the corporate profits and equity markets.
• Impact of Sanctions: The Russian invasion in Ukraine has already jolted the market, while the strict sanctions from the west could impact the financial sector.
• Technical Indicator: From a technical standpoint, the current market price is close to the Upper Bollinger Band, while 14-day RSI (~53.51) is approaching the overbought zone.

Q4 FY21 Financial Highlights (for the year ended on 31 December 2021, released on 24 February 2022)

 (Source: Company Website)

• The rise in Net Income: The Company posted a net income of £4.12 billion in Q4 FY21 compared to £3.59 billion in Q4 FY20 due to an increase in net income and a decrease in operating lease depreciation.
• Sustained Operating Costs: With operational costs of £2.03 billion in Q4 FY21, almost flat from Q4 FY20, the Company has maintained its cost restraint.

Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)                                                                                 

Valuation Methodology: Price/Book Approach (FY22) (Illustrative)

Conclusion                                                                                                  

Based on the attractive notional gains in the short-term, macroeconomic instabilities, bearish technical indicators, coupled with the unfavorable Valuation conducted above, we have given a "SELL" recommendation on Lloyds Banking Group PLC at the current market price of GBX 49.07 (as of 17 March 2022, at 8:25 AM GMT).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.

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