The Lloyds (LSE: LLOY) share price has been a pretty terrible investment to own over the long run. There have been some periods in the past decade where the stock has put in a positive performance. But over the past 10 years, shares in the company have produced an annual total return of -1.5%. Over the same timeframe, the FTSE 100 has returned 5% per annum, including dividends.
Unfortunately, the stock’s performance isn’t any better when we look at the last five years or 12-month periods. The stock has lost around 43% of its value over the past five years. Over the past year, it is off approximately 15%.
These figures suggest the bank has consistently disappointed investors. Nevertheless, past performance should never be used as a guide to future potential. Just because the stock has been a poor investment over the past decade doesn’t mean it’ll be a bad investment over the next 10 years.
With that in mind, I’ve been taking a closer look at the Lloyds share price, with the view to adding the stock to my portfolio.
Lloyds’ problems over the past year have been well documented. As one of the UK’s largest banks, the lender’s fortunes are tied to those of the UK economy.
When the economy struggles, Lloyds struggles as well. Last year, the economy posted one of the largest contractions on record. The lender is set to report billions of pounds in losses as a result.
This isn’t the only challenge the group faces. Ultra-low interest rates have severely impacted its profit margins. It doesn’t look as if the Bank of England will increase interest rates anytime soon, which suggests this pressure will last for some time.
So, those are the challenges the bank currently faces. But what about its opportunities?
Lloyds share price opportunities
I believe these are twofold. If the UK economy rebounds over the next 12-24 months, the lender could see a substantial increase in demand for loans and other products, which would be great news for its bottom line.
As well as this potential, Lloyds is also trying to diversify. It’s been expanding into wealth management and other products, as well as streamlining its existing bank operation to reduce costs. These initiatives may help it navigate the low-interest-rate environment.
I believe these opportunities could help the company return to growth in 2021 and 2022. This may mean the Lloyds share price finally starts to produce a positive return for investors.
The corporation has its challenges but, right now, it looks to me as if there’s a lot of negativity already factored into the share price. If the lender can overcome these challenges, I think investor sentiment towards the business could improve dramatically.
Of course, this is only a rough guide. There’s no guarantee investor sentiment will improve if the company can return to growth. Nevertheless, despite Lloyds’ poor track record, I’d buy the stock for my portfolio today.