The Motley Fool

This is what I’d do about the Lloyds share price right now

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Piggy bank on floorboards
Image source: Getty Images.

The banking landscape has transformed in recent years. Retail banks are no longer such a common sight on the high street and a regular visit to your local branch manager is out of the question. These days banking is mainly done online or over the phone.

Lloyds Bank (LSE:LLOY) is no different and its share price partly reflects that these changes have not generated a positive outcome for one of the sector’s big names.

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...

Digital demons

Several ‘challenger banks’ have popped up to confront traditional banks. Mainly stimulated by the rise of the internet, these digital banks are competitive on price and service, which leaves big banks like Lloyds with little room for manoeuvre.

Despite the PPI mis-selling disaster being put to bed, Lloyds still has many hurdles to contend with in 2020. The share price is down 2.25% in the past year. That’s not a lot, but the share price has seen considerable volatility too. Year-to-date, it’s down over 11% and that’s only a matter of weeks into the year. Unfortunately, I think the share price has further to fall.

Brexit is likely to throw up a multitude of challenges in the coming months as the UK negotiates new trade deals with the EU prior to a complete and final break up at the end of the year. The ongoing uncertainty of Brexit will continue to weigh heavily on Lloyds until it concludes. A good trade deal would massively change the outlook for the banking sector, but little can be predicted and worries about a potential market crash are also playing on shareholders’ minds.

Interest rates and inflation have been low for some time and this is unlikely to change in the near term. Our slowing economy doesn’t do the banking sector any favours either.

Too little too late?

Lloyds is 255 years-old but is making strides toward a digital future. However, converting legacy systems into sleek, fast, modern systems is no small undertaking. This is where challenger banks have an edge and less expenditure.

Lloyds has also announced it intends to close 56 branches between April and October in another cost-cutting bid.

It’s not all bad news though. The Bank of England recently undertook a stress test to assess the health of UK banks. This test found that the top banks, including Lloyds, are adequately prepared to withstand another financial crisis such as a Brexit-induced economy meltdown or a major global recession. But while this is reassuring to its customers, it wouldn’t come without cost to shareholders.

So, what would I do about the Lloyds share price right now? I’d continue to avoid it. I agree it looks good on paper, with a price-to-earnings ratio of 10 and a generous dividend yield of 5.7%, but I still think the uncertainty surrounding the economy makes it too risky. 

There are many more desirable UK stocks in the FTSE 350 to choose from. I think there’s bearish sentiment towards big banks for good reason and I’d seek out safer sectors to invest in.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Kirsteen has no position in any of the shares mentioned. 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.