Will the Lloyds share price ever recover?

The Lloyds (LSE: LLOY) share price looks dirt cheap at just below 42p, but there’s a catch. It always looks cheap.

I’m baffled by this because I think the FTSE 100 bank is brilliant value. So why isn’t it blazing ahead?

Most investors will remember how shares in Lloyds were hammered by the Financial Crisis. What many forget is that its glory days were actually in the long bull run of the late 1990s, when the City of London was rampant.

A long way down

On 9 April 1998, the stock peaked at what is still an all-time high of 506.99p. So a quarter of a century ago its share price was 12 times higher than today. That’s comfortably above their pre-credit crunch peak of 293.53p, in February 2007.

The stock crashed to just 20.82p by 9 March 2009, when the Financial Crisis was finally brought to a halt by near-zero interest rates and quantitative easing. By May 2009, they’d recovered to today’s level of 42p. But apart from the odd spike, they’ve flatlined since. They’re down 31.54% over five years and 6.27% over 12 months.

I’ve written umpteen articles about Lloyds over the last dozen years. At first, I was reporting on tortuous efforts to separate the so-called bad bank from the good. Investors who dived in hoping to pick up the stock at a bargain price then were repeatedly frustrated as new issues emerged.

I innocently assumed that once Lloyds cleared up the mess, returned to profit and resumed its dividend, its stock would rise. Well, last month, it posted a 23% increase in half-year profits to £3.8bn and hiked its interim dividend by 15%. But investors still greeted the news with a weary shrug. The stock is down 9% in the last month.

Today, Lloyds shares trade at just 5.85 times forecast earnings. They are expected to yield 6.62% in 2023 and a staggering 7.5% in 2024. It gives me comfort to run through these figures. It justifies my decision to buy the stock last November, and again in June.

Now I’m itching to buy more of the stock, but why won’t it climb?

I still can’t resist it

Obviously, today’s crisis isn’t helping. While rising base rates have allowed Lloyds to increase its net interest margins, as the UK’s biggest mortgage lender it’s on the frontline of a potential house price crash. Lloyds is already setting more money aside for potential debt impairments.

Also, it’s not quite the smooth money-making machine we would like it to be. Earnings and dividend per-share figures have been jumping all over the place (the pandemic didn’t help) but they’re starting to stabilise and grow, as my table shows.

I think these figures show clear signs of brighter times ahead for Lloyds, and I will be buying more stock in the weeks ahead. The problem is I’ve been anticipating a rebound for years and it still hasn’t come.

Today’s crisis has got further to run, so I’ll have to remain patient and keep reinvesting those juicy dividends. One day, Lloyds shares have to fulfill their potential, don’t they?