If the Lloyds share price doesn’t pick up soon, will I sell? No!

I’ve been losing money on the Lloyds share price for years. So is it time to sell and run now? I look at the risks facing the bank.

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The poor performance of the Lloyds Banking Group (LSE: LLOY) share price highlights a common dilemma we face as private investors.

When do we admit we got it wrong, give up, and sell?

That’s always been my biggest weakness. And with Lloyds shares still way down from the price I first paid to buy some in 2015, it’s a question I do need to ask.

Reasons to sell

I think all of us should regularly look back at our past decisions and ask one simple question. Would I buy this now?

And perhaps the best way to try to avoid bias with a stock we already own is to look for reasons to sell.

Recent news of more Lloyds branch closures might have rattled the market a bit. But that’s surely just a result of the way banking services are moving these days.

In fact, branches cost money, so maybe it’s even a good thing.

Interest rates

Interest rates are a bigger worry, and for Lloyds I see a two-way threat.

Higher rates mean better margins, but they also mean more bad debt threats. And as the UK’s biggest mortgage lender, Lloyds could be at more risk than the rest.

But it works the other way when rates fall. Mortgage pressure should be easier, but lending margins should fall.

So far, Lloyds has only had to make modest provisions for bad debts. So lower interest rates might well be a bigger danger.

UK economy

I think the other main risk is from the UK economy itself. As it’s now totally domestic in its business, Lloyds is, again, more at risk from this factor than the other FTSE 100 banks.

We’re technically in recession. Still, as they go, it’s only a small one so far. And I do see long-term growth ahead here in the UK.

But anyone who thinks we’ll have a rapid return to anything like strong growth… well, I’d expect to be disappointed.

Time to dump?

It does seem as if banks in general face a lot of uncertainty now. And Lloyds could be in for more than most.

But as long as the valuation is low enough to cover the risk, I’d say it would surely be a mistake to sell. And right now, I think that’s exactly what we have.

There’s a strong consensus for earnings growth at Lloyds among City forecasts. And the bank doesn’t seem short of cash. In fact, it’s in the midst of a big share buyback as we speak.

Or buy more?

So, I still think what I see here is a high quality company with its shares priced too low. I can’t see anything but a strong future for the bank sector.

And mortgage demand in the UK must surely keep on growing over the long term, mustn’t it?

Oh, and I’ve missed what might be the key thing here… a 5.6% dividend yield, forecast to keep rising.

So, no, I won’t sell my Lloyds shares. And, while I can see clear risks, I intend to buy more in 2024.

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.

Alan Oscroft has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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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