The Motley Fool

Why Lloyds Banking Group plc would be a bad investment in the event of a Brexit

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.

It’s a debate that looks likely to tear the Conservative party apart if some of the reports are true. However, with less than a month to go before Britain goes to the polls, there’s still everything to play for.

Should I stay or should I go?

As an investor I’m less worried about political mud being slung by both sides as I see this as the everyday norm in UK politics with the only change being the subject matter.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

No, I’m more focused on the impact the vote going either way could have on my investments. Now I should say from the off – I haven’t sold all of my investments with a view to buying back after 23 June – that could turn out to be folly. But I’m currently wary of certain shares that are economically sensitive and could sell-off in the event of a leave vote – or more to the point the fear of the impact that a vote for Brexit would have on the economy as a whole.

Now I’m no economist, nor am I about to offer my personal view as to which way I will be voting or try to sway readers either way – in my view the decision should be made with all of the information to hand. However, there’s no shortage of views wherever you look, and while some don’t stand up to scrutiny, there are, in my view some by respected organisations on both sides of the debate that should be considered further.

But what if?

One of the starkest warnings came from the treasury on Monday, which suggested leaving the EU would tip the UK into a year-long recession, with up to 820,000 jobs lost within two years. In response Boris Johnson dismissed the study as “more propaganda” from the remain side, which he claimed was “rattled“.

However, if we did vote leave and the recession came I think that it would be particularly bad for more domestically-focused banks such as Lloyds (LSE: LLOY).

You see, Lloyds is a geared play on the UK economy. As we’ve witnessed since the financial crisis and the near fatal acquisition of HBOS, the bank has been putting itself back on a firmer footing, returning to growth and even paying dividends, which are expected to grow quickly from here.

However, what if we do get the threatened recession? With consumer debt levels not far off those pre-financial crisis and house prices at record highs (partially driven by ultra-low interest rates and fairly easy access to credit), I can see Lloyds having to make higher provisions for bad debt, and writing down the value of property on its mortgage books as some customers will struggle to service their debt if the economy dips.

However, as we can see from the chart Mr Market seems to be predicting the voting public will choose to stay in Europe given the recent strong run-up of the shares over the last few trading days.

Despite the strong run, the shares still trade on a single-digit forecast P/E and are set to yield over 6% according to data from Stockopedia. And while there may be volatility going forward, especially if the polls are wrong, the shares are worthy of further research for those with a long-term view.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.