The Motley Fool

Is this the last great buying opportunity for Lloyds Banking Group plc?

The Bank of England this week cut its forecast for UK economic growth to 1.9%, from 2%, and warned of reined-in consumer spending as inflation starts to bite while wages stall.

Our banks are also still on uncertain ground as we head towards our exit from the European Union in a couple of years, so we should expect to see Lloyds Banking Group (LSE: LLOY) shares remaining under pressure until we’re out, shouldn’t we?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Well no, I don’t think so, and on top of continuing to rate the shares as undervalued, I see a couple of events that could well give them the kick they need to give them a boost. With a slow but steady rise of 13% over the past six months, to today’s 69p, I reckon there’s some held-back momentum there just waiting for a shackle or two to be thrown off.

Government stake nearly gone

One of those shackles is the government’s remaining stake in Lloyds, and while it’s slowly been sold off it provides an artificial balance between supply and demand and keeps the price down. When it’s all gone, investors wanting to buy Lloyds will have to get their shares from others who are less keen to dump them.

But now, all that’s left of the taxpayers’ ownership is a tiny stake of around 0.25%, which chief executive Antonio Horta-Osorio suggested at the firm’s AGM on Friday could be totally disposed of within the next few days.

Political uncertainty has also surely been holding our banks back, with a risk that the government’s small majority in parliament could be held hostage by extreme eurosceptics on the back benches and by those still clinging to their last hopes that Brexit might actually be avoided.

A big Conservative win in the upcoming general election would put paid to that risk, and allow the moderate mainstream of the party to try to get the best exit deal we can. Now, I never thought I’d be cheering for a Tory victory, but the UK’s economic position is by far the most important issue facing us right now — and an economy- and business-focused government is surely what we need.

Irresistible dividends

What I think should make Lloyds more attractive than most banks is its recovering dividend and its strongly progressive dividend policy. Pre-tax profit is expected to exceed £7bn this year, and that should happily support a forecast dividend yield of 5.3% — and with the bank’s payout ratio expected to rise, analysts think we’ll be seeing better than 6% by 2018.

Another thing that makes me feel bullish stems directly from Lloyds’ disaster and its bailout. It forced the bank to fundamentally rethink itself, from the roots upwards, in a way that rivals that avoided going cap-in-hand to the taxpayer did not have to do.

The result of that shows, with Lloyds now boasting the lowest cost-to-income ratio of the big high street banks, and it’s expected to be lowered further in the next couple of years. And Lloyds’ CET1 ratio of 14.3% is up with the very best too.

The City’s analysts are getting behind Lloyds too, with a pretty strong buy consensus out there now and the bulls targeting 75-8p in the short term. With Lloyds shares on a forward P/E of only around 10, I’m firmly in the buy camp too.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.