Lloyds Banking Group PLC Sale Makes Me More Bullish

Lloyds Banking (LSE: LLOY) (NYSE: LYG.US) continues to benefit from positive updates, with the latest encouraging news item being the government’s sale of 6% of shares to mark the beginning of the re-privatisation of the bank.

This is great news for shareholders such as me because, in my view, the government’s stake has acted as something of a dampener on market sentiment. Indeed, it is only since the government announced that it would start selling its stake that sentiment (and the share price) has picked up significantly.

Of course, the sale marks five years since Lloyds acquired HBOS and, in my opinion, highlights how much Lloyds has improved during that time.

Indeed, Lloyds has come a long way since it was bailed out by the government in a £21 billion deal during 2008.

Today it is in a much stronger position and I’m considering adding to my shareholding for the following three reasons.

Firstly, I believe that Lloyds has a sound strategy of refocusing its efforts on areas of the business that are less risky and that provide higher returns while utilising lower amounts of capital. Indeed, Lloyds has been busily disposing of assets that it views as non-core, with news flow over the course of 2013 being dominated by such items.

Secondly, as someone who is frustrated by low savings account rates and the constant threat of inflation, the fact that Lloyds is aiming to pay out up to 70% of earnings as a dividend by 2016 resonates well with me.

Interestingly, this puts shares on a prospective yield for 2016 of over 7%. Of course, these are just market expectations, but they highlight how quickly Lloyds could go from being a stock with a paltry yield (as it is today) to one of the highest yielders in the index.

Thirdly, the growth prospects for Lloyds are staggering. Earnings per share are forecast to grow by 30% in 2014 alone, making Lloyds one of the most attractive growth stocks in the FTSE 100.

So, a sound strategy, the potential for a high yield and impressive growth prospects mean that I’m bullish on Lloyds following the government’s decision to sell 6% of the business. In fact, I’m seriously considering adding to my current shareholding.

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> Peter owns shares in Lloyds Banking.