Over the past 12 months, Lloyds Banking Group (LSE: LLOY) shares have climbed 21%, and most of that has been since the start of 2024.
Every £1,000 invested back then would be worth £1,210 now. And that’s not a bad result at all in just a year.
What a shame then that I bought mine in 2015 at a price of 76p. Every £1,000 I put in is now worth less than £750.
Actually, with dividends, I’ve broken even, but it’s a bad result. Still, past performance is not an indication of future performance, thankfully. And bank stock valuations do look like they’re pulling back up from the depths.
What next?
The Lloyds share price has been climbing strongly in 2024, so we’re not looking at quite the same dirt-cheap bargain we might have had a few months ago.
The first quarter this year saw a fall in profit, so we’re not out of the woods yet. But the next 10 years have to be better than the last 10, right? What about the next 12 months?
Well, the outlook’s still tough, we can’t escape that. Operating costs in Q1 were up 11%. And Lloyds added another £57m to its impairment charge.
Risk-weighted assets rose by £3.7bn too. The bank reckoned though, that that includes a “£1.5bn temporary increase that is expected to reverse in the second quarter”.
Guidance remains positive, with the board expecting a full-year return on tangible equity (ROTE) of about 13%, with a CET1 ratio of 13.5%. The latter is a measure of liquidity, and it looks good to me.
Buy more now?
I’m torn over whether to buy more Lloyds shares, now the price has had a good run.
On one hand, I’m still very much drawn to the stock’s valuation. The forward price-to-earnings (P/E) ratio for 2024 has risen to almost 10 now, which isn’t that far below today’s FTSE 100 valuation.
Forecasts have it falling to about 6.5 by 2026 though. A lot can happen to the economy in two years mind, and I’m not going to assume it will all be good.
The other thing I’ve always liked about Lloyds is not quite so attractive these days. I’m talking about the dividend, with the predicted yield now down to 5%.
That’s still a decent return, and it could be back over 6% by 2026. But other Footsie stocks offer some attractive yields. There’s a very tempting 9.8% from M&G, for example.
Verdict
If I didn’t hold any bank stocks, I’d have Lloyds near the top of my wishlist, for sure. It would have to compete with NatWest Group and Barclays though, and I’m not sure which I’d go for today.
But as I already bought some Lloyds, my next ISA buys will head out into other sectors for a bit more diversification. And there are lots of FTSE 100 buy candidates to choose from.
I’m holding my Lloyds shares though, for hopefully at least another decade.
