I was surprised to see that the last time the Lloyds (LSE: LLOY) share price was over 100p was prior to the 2008 financial crash. That’s 15 years ago! Could the shares reach such heights again?
Why the Lloyds share price has remained low
As I write, Lloyds shares are trading for 42p, which is pretty much where they were at this time last year, trading for 43p. Since February of this year, they’ve fallen 20% from 53p.
The most recent Lloyds share price drop can be attributed to macroeconomic issues. These include soaring inflation as well as rising interest rates.
Going back a few years, the pandemic hampered all global markets. Since then, a post-pandemic hangover hasn’t helped Lloyds either.
Using my DeLorean, I can see Lloyds shares fell off a cliff back in 2008 from around 280p to 28p. That’s a mammoth 90% drop. This was attributed to the financial crash of 2008. I’m sure you’ve read plenty about it. Hollywood even got in on the act and The Big Short did a great job of telling the tale, in my humble opinion.
Since then, the UK has seen its investment viability trashed due to Brexit. Foreign investors aren’t quite sure of the direction of the UK’s economy, so investment has cooled.
Current investment viability
The Lloyds share price looks an attractive investment to me at present. The shares look decent value for money on a price-to-earnings ratio of five, especially when comparing this to peers in the UK and Europe. The average ratio is around eight. Plus, there’s a dividend yield of over 5% on offer. Furthermore, recent half-year results were promising, and pre-tax profit and total income rose by 23% and 12%, respectively.
Of course, current issues, namely rising interest rates, could hamper the share price. A short-term byproduct of these rising rates has benefited the bank with increased income. However, when rates rise, the likelihood of defaults rises too, which can impact performance. This is very much a double-edged sword.
Will the Lloyds share price rise again?
In theory, I do believe Lloyds shares could reach 2008 levels once more. However, I don’t see that happening for a fair few years yet. There are too many economic and political factors causing havoc right now. These include the battle to curb inflation, rising interest rates, fears of a housing crash, and the looming spectre of another global financial crash. The list is rather long for my liking.
One of the reasons I believe Lloyds shares could head upwards is its position and profile. It is one of the largest mortgage lenders in the country. If the economy stabilizes and the government can build more homes, as demand is currently outstripping supply, as well as help people onto the property ladder, the business and share price could be boosted.
I don’t expect to see Lloyds shares fly high anytime soon. That said, I’d buy the shares when I next have some spare cash to invest. They still look like a good investment to me right now.
