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Neil Woodford Dismisses Lloyds Banking Group PLC Link

Whispers that super investor Neil Woodford is eyeing up a stake of Lloyds (LSE: LLOY) (NYSE: LYG.US) have been flying around the City — but now, the man himself has refuted the speculation.

The Daily Mail recently reported that Woodford was considering investing in c.10% of the bank’s shares, as the government looks like it will soon begin to sell its stake in the bank.

However, the manager of Invesco Perpetual’s Income and High-Income funds has denied that he’s interested in the stock, claiming:

“I cannot quantify the risk of dilution through future capital raisings and remain concerned about the extent of loan losses sitting in these banks’ balance sheets, awaiting recognition in the coming years as and when they have enough capital to absorb them.

“This process of loss recognition still has several years to run, in my view, and the prospect of dividends from the likes of Lloyds during this process is remote.”

Woodford famously sold out of the banking sector just before the global financial crash in 2008-09, but while he made clear that he has no intentions to buy a stake in Lloyds currently, he was more upbeat about investors’ benefiting from the fortunes of HSBC (LSE: HSBA) (NYSE: HBC.US).

He highlighted how the diversified bank has “made better progress in clearing up [its] balance sheet”, and that anyone looking to invest would have to look more at the exposure to Asia, and be “comfortable about the risks associated with the slowdown in activity that is now evident in that region”.

Shares in Lloyds are currently up over 120% in the last 12 months, while HSBC is up over 30%.

If you’re interested to see which sectors the City maestro IS firmly backing right now, though, then check out The Motley Fool’s updated special report, “8 Shares Held By Britain’s Super-Investor“.

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> Sam does not own shares in any company mentioned.