Have I changed my mind about the Lloyds share price?

The Lloyds share price has shot up 14% in the last month, making James Reynolds wonder if he should change his views on the UK bank.

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The Lloyds (LSE: LLOY) share price has left a lot to be desired in my eyes. It seems to perpetually stick between 40p and 80p with no end in sight and has been slow to recover from the Covid crash. But the share price has shot up 10% in just the last month. With talk of interest rate rises and the economy in recovery, I’ve started wonder if I should reconsider my views on the UK’s largest mortgage lender.

Share price and fundamentals

Lloyds’ share price has been on a steady uptrend over the past year. It started last January at around 33p and has increased 59% to 53p at time of writing. Growth of 45% in a year is nothing short of fantastic and represents some great strides made by the bank in that time. This still sits at 10% below the pre-pandemic price, and now looks like a tempting buying opportunity to me. The pandemic seems very close to being in the rear-view mirror and a return to normality could be just what the shares need to bump them back up. But there’s no ignoring the nearly 10 years of stagnation that came before.

The 2008-09 financial crash obliterated the share value of banks around the world. Lloyds’ shares fell by almost 90%, going from 300p all the way down to 50p between 2007 and 2009. Since then, the shares have been languishing beneath the £1 mark. I think that tighter regulations on the financial sector are to blame for this so, unless the UK wants to de-regulate, I don’t see the share price reaching those heights again.

There are, however, other reasons to consider adding Lloyds to my portfolio. It has an A- on the CDP score. The share’s price-to-earnings ratio (P/E) is a very reasonable 7.96 and Lloyds issues a small dividend. Right now, the dividend yield sits at 2.37%, and although Lloyds decided to forego one last year, it is still worth considering.

Lloyds’ 2022 plans and beyond

Lloyds has notably been taking steps to increase profitability and expand its revenue streams. The bank made headlines as it announced plans to invest in the development of new rental properties around the country. The housing market is very competitive at the moment and renting homes could well pay off in the long run. But it remains to be seen if it will be as profitable as simply lending mortgages.

Lloyds has also been shutting branches across the country. Many other banks have been doing the same as more and more people prefer to do their banking online. The saving incurred from not having to hire staff or rent spaces could add up to tens of millions over the long term, but I’m concerned that a reduced high street presence could ultimately hurt Lloyd’s brand. I’ve wondered if Lloyds is the largest mortgage lender in the country because of its sheer ubiquity and I worry branch closures could affect its market share.

Have I changed my mind?

On top of all the listed cost cutting measures, the Bank of England is expected to raise interest rates, which will in turn allow Lloyds to earn more from its borrowers. I still don’t think the share price will reach the heights it once did. But Lloyds seems like a good bet against inflation, and I will be adding it to my portfolio.

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.

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

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