13th February 2014
Lloyds may continue to trade sideways for the medium term says the Share Centre as it continues to rate shares a hold. The Share Centre says that Lloyds could continue to trend sideways partly due to the ‘overhang’ of plans from the Government share sale. The UK taxpayer currently retains a 33% holding.
Although the firm has announced firm plans to pay a dividend, the broker says this may disappoint investors because they are unlikely to see cash returned until next year. The bank has not paid a dividend since 2013.
Graham Spooner, head of investment research, says: “Retail investors can expect the second sale of shares to happen in the coming months as the bulk will be sold before the next election. In light of criticism of the Government for “giving away” Royal Mail shares, investors should be aware this may be taken into consideration when pricing the sell off.
“Signs of improvement have pushed the shares to a premium rating over the last two years, albeit from a very low base. Over the last six months it has been trending sideways and investors could see this continue ahead of the Government sale as any upside in the share price could be limited due to the market overhang.
He adds: “The boost in the demand for loans has seen Lloyds pledge to be a significant dividend payer, returning at least 50% of its earnings to shareholders. However, it is a little disappointing for investors that this won’t happen sooner with initial payments expected early next year”, he adds.
“We continue to recommend investors ‘hold’ Lloyds. There are still hurdles for the bank to overcome and as we have seen from the increasing levels of provisions it is still suffering from previous mistakes. The uncertain economic recovery and rules and regulations the banks face could continue to impact Lloyds.”