When you’re on a roll, you feel unstoppable.
Whether this is after a winning bet, an investment that has gone well or any other event, that winning feeling makes you feel like it will last forever.
Of course, it won’t. However, in business that winning feeling can perhaps best be summed up in one word: momentum.
Indeed, a business that has momentum not only feels like it is unstoppable, in many cases it may well be very difficult for anyone to put a spanner in the works in the short run.
This seems to be the position in which Lloyds (LSE: LLOY) (NYSE: LYG.US) finds itself. It is in the process of shedding non-core assets and focusing on core assets (i.e. the ones that don’t tie up too much capital, offer a relatively high return and are deemed to be not unreasonably risky by the regulator).
So, I was pleased to read that the bank is finalising plans to shift yet another non-core operation. This time it is a German life assurance operation, with Lloyds hoping to receive as much as €400 million from the sale.
Although this is less than the €1 billion the bank had hoped to receive, it has been trying to sell it for over two years so a sale is undoubtedly good news. The buyers look set to be Hannover Re, a German reinsurer, and a clutch of private equity groups who together are hoping to purchase Heidelberger Leben from Lloyds.
Of course, the news comes on the back of a bullish set of results from the company, when the CEO unveiled his strategy for turning the company around. This potential sale would neatly fit in with that plan and would be yet another disposal to show that Lloyds really is on a roll in terms of restructuring its business ready for post-government ownership.
As ever, shares look cheap. Lloyds currently trades on an adjusted prospective price-to-earnings ratio of 14.4, which compares favourably to the wider financials industry group on 19.3 and to the FTSE 100 on 15.
In addition, earnings per share are forecast to grow at an annualised rate of up to 20% over the next two years. This, combined with an aspiration to pay out two-thirds of earnings as dividends, means that, for me, Lloyds really is on a roll.
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> Peter owns shares in Lloyds.
