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magazineCutting our losses on Lloyds
Lloyds (LLOY) 24p
Loss to date: 62.4%
Original entry point: Buy at 63.93p, 19 December 2019
Our positive call on high street lender Lloyds (LLOY) has gone horribly wrong and, while we couldn’t have predicted the unprecedented events witnessed in 2020, we should have been quicker to respond to its poor performance.
We originally hoped the definitive election result and resulting political stability would lead to a positive domestic picture, supporting Lloyds’ share prices and underpinning its income appeal. Clearly December 2019 was a very different place from just a few months later when the Covid-19 pandemic hit.
The banking sector has been ravaged both by exposure to a rapidly deteriorating economic outlook in the UK – which has been served with a side dish of growing uncertainty over Brexit – and to falling interest rates as the Bank of England has sought to prop up the economy.
Lloyds’ profit was wiped out in the second quarter as it chalked up bad debt provisions of £2.4 billion.
If that wasn’t enough then the sector has effectively been prevented from paying investors the dividends they crave by the regulator.
The outlook remains weak and with talk of potential negative interest rates, it’s time to cut our losses.
SHARES SAYS: While we are having to swallow a big loss, it is hard to make a case for the picture improving much in the final quarter of the year and we think it is worth sparing ourselves from any further pain. Sell.
Important information:
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