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LLOY share price slide: Lloyds Bank is facing another scandal. Here’s what I think

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Lloyds Banking Group (LSE:LLOY) has had a dismal year and the bad news just keeps on coming. The LLOY share price is now down 58% year-to-date, but could it go even lower?

Disgrace and shame

As we saw recently with Boohoo Group over the Leicester factory scandal, being the subject of negative news stories isn’t good news for any share price. In the latest scandal to hit Lloyds, it took advantage of the government Bounce Back loans being offered to customers affected by the Covid-19 pandemic. It seems the bank forced customers claiming this financial aid to open a business account to access their funds. Around 30,000 customers were operating their business through a personal account and should have been permitted to claim the money without being forced to open a separate business account.

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The Competition and Markets Authority (CMA) accused Lloyds of breaching the CMA regulations it had previously signed. This reduced the choice available to customers and put them at risk of facing unnecessary charges. Lloyds’ share price fell in response to the news. 

Streamlining measures

It has also come in for criticism from a trade union over its job cut plans. It has announced a further 865 redundancies as part of cost-cutting measures. It had planned to streamline before the pandemic hit, but had put this on hold. Now it feels the time is right to restructure. However, trade union Unite has slammed the decision.

But the FTSE 100 bank is no stranger to slashing jobs and has already cut thousands in the past 10 years. Lloyds also said it will be creating 226 new jobs, for which it hopes to redeploy some existing staff. However. 

Could the LLOY share price fall further?

While cost-cutting measures can cause negative headlines, they should help the bottom line — and the share price. But even though many analysts believe all negative news has already been priced-in to the Lloyds share price and things can only get better, not everyone agrees. London based hedge fund Marshall Wace has taken out a £100m short position against the bank as it believes the LLOY share price has further to fall.

With the pandemic raging on, Brexit negotiations falling foul of the law and the economy in a deep recession, I can see why it’s bearish on Lloyds at this time.

Lloyds’ price-to-earnings ratio is a very low 7 and its earnings per share are 3.5p. It won’t be buying back shares as long as Covid-19 remains a problem and hasn’t yet reinstated its dividend. Until it does, I’ll steer clear.

Of course, if everything turns around, interest rates rise, and a vaccine saves the day, then the LLOY share price could bounce back with bullish force. But I don’t hold out much hope for that to happen soon. I think there are better UK stocks worth buying to boost your long-term wealth. 

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value, Barclays, ITV, Lloyds Banking Group, and Tesco. 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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