The Lloyds Banking Group (LSE: LLOY) The share price is falling. In the last five years, its returns have been disappointing -22.2%. Although it showed some signs of recovery after the epidemic, its shares have been steadily declining since May 2021, when it last touched the 50p ceiling.
But the UK banker still seems like a valuable buy for my portfolio when I consider his recent financial performance and market position. Can Lloyds share price return, and is it worth buying my shares now? Find out.
Share price valuation
Due to the recent share price decline, I think so FTSE 100 The share price is much lower at the moment. At 43p, it is currently trading at a price-to-earnings ratio of 6.6. Moreover, the bank resumed canceled dividends in 2021.
The current dividend yield stands at 2.9% and is nearly tripled by earnings. Analysts forecast 3 5.3bn revenue in 2021, with yields expected to increase in the next few years. With all this in mind, the Lloyds share price looks like a bargain to me. But what is the potential for growth? When in doubt, I always go back to the financial side of the company.
The 2021 half-yearly report seems promising to me. The bank has recorded a profit before tax 3.42bn. I think it’s a great recovery after a great H1 2020, when the bank recorded a loss of £ 200 million.
But the total net income decreased %% to £ 459m, mainly due to lower mortgage interest rates. My colleague Rupert Hargreaves discusses how Lloyds is lowering interest rates by increasing credit card services. I think this is a clever move by the older UK donors.
Lloyds is also looking to improve in real estate due to the growing real estate market. Citra Living, Its new housing brand, FTSE 100 has established a partnership with the company Barrett Developments. Lloyds plans to build 50,000 homes by 2030. Although many see this as a risky move, I see a reversal. The UK housing sector is buzzing and I hope Lloyds shares will benefit from this move in the next decade.
Share price forecast
Banking shares are very cyclical. Even if there is a brief downturn in the market, the UK economy seems to me to be ready to continue the recent recovery. As retail markets open, consumer spending continues to rise. Also, the report said interest rates could rise next year. This could improve revenue in the banking sector.
However, there are potential risks that make me uncertain. The global stock market is looking shaky at the moment. Given the evergreen situation in China, I think Lloyds share prices could fall further. Also, in an uncertain economic environment the demand for real estate may decline which is not good for its recent investment. There is no guarantee that interest rates will rise next year, which is what Lloyds warned me about right now. I am watching its market performance very closely and will consider investing in Lloyds shares if there are strong signs of market recovery.
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Suraj Radhakrishnan has no position in any of the mentioned shares. Motley Full UK has recommended Lloyds Banking Group. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.