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Will it soon be too late to buy Lloyds Bank shares at this low price?

When I saw the Lloyds Banking Group (LSE: LLOY) share price climb by 12% on Friday, I thought great, only a few more months like this and I could break even.

I exaggerate slightly. With the shares closing Friday at 59p, I still have a little way to go to get back to the 76p I paid back in September 2015. Whatever exuberance there is right now, I think that puts it into perspective a little. Sorry for being a sourpuss.

Bad result

A 22.4% fall in four years looks poor by any standards, but my result isn’t actually as bad as it might appear. The difference is dividends and, in total, I’ve received 12.4p while I’ve held the shares, so my actual loss over four years comes to 4.5%.

If that’s the worst I could do by investing in a company about to be hit by PPI costs that turned out far higher than expected, and which was about to be hammered by years of growing Brexit fears, well, I think I got off quite lightly really.

Other banks gained on Friday too, after slightly more optimistic Brexit noises started emerging from Downing Street, from Dublin, and from Brussels. We saw the Barclays share price gain 7.5% on the day, and Royal Bank of Scotland picked up 11.5%, so are the worst days for the banking sector finally behind us and should be be cheering for a recovery?

Hold on

I wouldn’t get too excited just yet. Should Michel Barnier or Angela Merkel say something slightly pessimistic on Monday, I expect the latest enthusiasm will evaporate. In fact, that might have already happened by the time you read these words. And even if Boris Johnson manages to seal a departure deal with the EU, he still has to get it past parliament — and we surely can’t have forgotten the three times Theresa May failed to do that.

What can you do about the uncertainty surrounding Lloyds if you’re thinking of buying some shares? I think there are three options. The simplest is to just wait out the uncertainty, see how Brexit goes, and re-evaluate the potential for investment when we have a better idea of what Lloyds’ future holds.

Half full, or half empty?

Or assume we’ll leave the EU with a negotiated deal. After all, looking at the horrible economic predictions increasingly being made by the captains of our industries (and they’re the people who surely know best), outsiders must be finding it hard to believe that Boris and others are even considering a no-deal exit. In such a scenario, I think Lloyds shares are a steal.

Then there’s the pessimistic assumption, that we’ll leave with no deal, face a years-long recession, and that Lloyds will face a few tough years and maybe even have to cut its dividend.

Low value

But you know what? Lloyds shares are on a P/E of only seven based on forecasts. And even in the pessimistic scenario, is the bank really only worth half the FTSE 100‘s long-term average valuation? Whatever you think of our Brexit deal chances, I see the Lloyds valuation as largely reflecting the pessimistic end of the spectrum.

And I remain convinced Lloyds shares are a long-term buy.

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