How I Rate Lloyds Banking Group PLC As A ‘Buy And Forget’ Share

Is Lloyds Banking Group PLC (LON: LLOY) a good share to buy and forget for the long term?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Right now, I’m analysing some of the most popular companies in the FTSE 100 to establish if they are attractive long-term buy and forget investments.

Today. I’m looking at Lloyds (LSE: LLOY) (NYSE: LYG.US).

What is the sustainable competitive advantage?

Lloyds used to be respected as one of the country’s oldest and largest banks, with 270 years of history and the widest network of branches. The bank was also the UK’s biggest mortgage lender.

However, the company’s reputation was seriously damaged by its losses suffered during the financial crisis and this has alienated many customers.

That said, Lloyds is still a cornerstone of the country’s financial landscape, so it is unlikely that the bank will note a drastic fall in the number of its customers.

Still, the bank’s profits are somewhat constrained by the inability to establish its own profit margins on the products that it sells to customers. In particular, the rate of interest that Lloyds can charge and offer to customers is inked to the Bank of England’s base rate, which the firm must adhere to.

Moreover, unlike some of its peers, Lloyds does not have a large investment banking division, which can be highly lucrative. For example, peer Barclays‘ capital markets division, Barclays Capital, was responsible for the majority of the banks profits during the first half of this year.

Company’s long-term outlook?

The outlook for Lloyds over the longer term is almost impossible to predict. Regulation and miss-selling fines are making it harder for the bank to return profit and uncertainty surrounding government intervention, is clouding the banks outlook — never a good trait in a buy-and-forget investment.

What’s more, an increasing trend towards peer-to-peer lending and smaller banking providers, are all factors that could affect Lloyds’ dominance over the high street and profitability in the medium term.

In addition, Lloyds has been forced to slim down both its portfolio of high-street branches and mortgage book, to some extent cutting the bank’s dominance over the two sectors where it used to have control.

Having said all of that, it must be said that the demand for banking services within the UK is unlikely to slow over the long term and as a key provider in the market, Lloyds is likely to see a sustained demand for its services.

Foolish summary

All in all, despite Lloyds’ dominance in the UK’s financial sector, the company’s future is too dependent upon regulation and government intervention to be a good share to buy and forget.  

So overall, I rate Lloyds as very poor share to buy and forget.

More FTSE opportunities

Although I feel that Lloyds is not a buy and forget share, I am more positive on the five FTSE shares highlighted within this exclusive wealth report.

Indeed, all five opportunities offer a mix of robust prospects, illustrious histories and dependable dividends, and have just been declared by the Fool as “5 Shares You Can Retire On“!

Just click here for the report — it’s free.

In the meantime, please stay tuned for my next FTSE 100 verdict

> Rupert does not own any share mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

4 penny stocks I’d love to buy for my Xmas stocking!

I'm hoping to buy these top penny stocks when I next have the opportunity. I think they could be some…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Why I believe the lagging FTSE 250 is a rare opportunity to buy cheap shares now

The FTSE 250 is showing some attractive numbers and they suggest some cracking value among businesses listed in the index.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is this FTSE 250 TV giant one of the best opportunities on the market right now?

A staple name among UK television lovers, this FTSE 250 stock has fallen substantially. Is it time to buy the…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Could this 2.5% yielding penny stock soar in 2024 and beyond?

This penny stock has struggled throughout 2023 but could the new year provide it with a much needed positive momentum…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to buy in December [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Close-up of British bank notes
Investing Articles

With £500 I’d start a passive income portfolio with these UK shares

Owning shares in an established business can be a great source of passive income. And Stephen Wright thinks now is…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

I’d buy these FTSE 100 and small cap stocks in 2024 to target a second income!

This FTSE share offers a 6% dividend yield and trades on a rock-bottom P/E ratio. Here's why I'll buy it,…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Here’s one excellent FTSE 100 value stock investors should consider buying

Sumayya Mansoor explains why this packaging giant is currently in value stock territory and should be on investors radars.

Read more »