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3 reasons why I think the Lloyds share price is a top UK investment for my ISA

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We’re all looking for top UK shares to add into our portfolios. Although you can buy stocks listed in the US or further afield, the majority of stocks you own are probably UK-based companies. And I’d imagine most of the firms are members of the FTSE 100. What does this prove? That most of the time, the top UK shares to buy are well-known household names. Which brings me to the Lloyds Banking Group (LSE: LLOY) share price.

I’ve owned Lloyds shares for years, and have bought and sold at different times. I last bought at 37p, with the share price currently trading around 29p. A share price that has stayed sub-30p for multiple days isn’t something that has been seen since 2012. But with this, I’m considering buying more.

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Top UK shares within an ISA

Before I get into why I like Lloyds at the moment, it’s important to note why I use a Stocks and Shares ISA. The Lloyds share price is at historic lows, and so if my call is right and I see positive returns, they could be large. Large returns means large cash profits, which normally would see me having to pay capital gains tax on the money. If the stock is held within my ISA, however, then I get to keep all the profits without tax. So really, for any shares you buy that you believe could have large growth potential, buy them in your ISA!

Why do I like the Lloyds share price?

Well, it’s cheap. But that should never be the only reason for buying a share. The Bank of England meeting last Thursday was broadly positive and resulted in upgraded economic forecasts. It also didn’t give much reason to think interest rates would be lowered into negative territory. This is a positive for the Lloyds share price. A key way Lloyds makes money is via the difference between the rate it lends out at versus the rate it pays. As we have seen in Europe, negative interest rates can kill bank profitability in this regard. The lack of desire by the central bank to take rates negative should be seen as a positive for Lloyds.

Then there’s Brexit that’s just around the corner. You could say this is a recycled phrase from years ago, but this time it really is true. Although the headlines are fairly quiet on this front at the moment, the current stance from the UK government is that it wants a deal struck by the autumn. As a bellwether for ‘UK plc’, the Lloyds share price should see strong gains from any confirmation of an agreement between the two sides. The sensitivity towards these headlines can be seen from the roaring single day gains late last year when a breakthrough looked likely.

Finally, I think the bad news is all but priced in at current levels. In a recent trading update for the first half of the year, provision for bad loans stood at £3.8bn! The pre-tax loss came in at £602m. I struggle to see how the business performance could get much worse. So I look to lockdown easing, higher mortgage applications and increased consumer spending to turn the tide for the next half.

Therefore, I’d pick up more shares in Lloyds right now for my ISA.

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jonathansmith1 owns shares in 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.

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