After taking a hit at the outbreak of the pandemic, the Lloyds Banking Group (LSE: LLOY) share price has seen a healthy recovery. With the FTSE 100 stock up over 60% the past year, the release of its half-year results for 2021 saw the share price fall slightly. However, with UK growth forecasts looking positive, is August an opportunity for me to buy Lloyds shares?
After initially halting dividends last year, a decision required by its regulator, Lloyds announced in its latest set of results that a further 0.67p per share is going to be paid to shareholders. That takes dividends over the past year to 1.24p. With a share price of 45.9p, at the time of writing, that means it offers a dividend yield of 2.7%. Although below the FTSE 100 average, at a time when the business is coming out of a gruelling pandemic, I deem this dividend yield an attractive factor when looking at buying Lloyds shares.
More generally, the half-year results also provided some optimism. While net income rose by 2% (to £7.6bn) from the same period last year, profits were at £3.9bn, a vast improvement from the loss seen in the six months to 30 June 2020. Loans and advances were also up £7.5bn for the period – sat just below £450bn. This ponders the question of whether now is a good time to buy Lloyds shares before we witness a solid bounce back, inevitably boosting the share price.
Another beacon of positivity from the results was the recent acquisition of Embark, an investment and retirement platform, for close to £400m. This highlights how Lloyds is diversifying, another positive sign when I’m considering if to buy Lloyds shares.
With all the above said, issues with the major bank persist. First of all, and as my colleague Alan Oscroft mentioned, Lloyds operations are focused heavily in the UK. While this can provide opportunities, as many expect the UK economy to have a strong end to 2021 as we hopefully continue to see Covid cases fall, it also poses issues. Should we see a spike in cases, the UK economy could once again face the problems it has done over the past 18 months. Where competitors have diversified, for example, HSBC focusing its operations within Asia, Lloyds has not done so.
Another issue with competition is that there are now banks that can offer a more dynamic service – a concept many customers may crave after the pandemic. Monzo, for me, is a standout in this respect.
Should I buy Lloyds shares?
Although I have highlighted issues with Lloyds, I generally have a positive outlook. The below FTSE 100 average dividend yield does not worry me, as a cautious return post-suspension should have been expected. Also, I think the UK economy has the potential to finish the year strong. Yet, the risk Covid provides makes me wary to buy Lloyds shares. For now, I will not be buying.
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Charlie Keough has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.