Of all the value shares I’ve written about since March’s market meltdown, Lloyds Banking Group (LSE: LLOY) has been the most disappointing. That’s because the Lloyds share price has probably performed the worst of all my deep-value share picks.
The Lloyds share price is in free-fall
When I first urged investors to take a look at its shares, the Lloyds price stood at 31.3p. I described this as “as an option on the bank’s future” and “for the price of a packet of crisps, you gain part-ownership of a £22.6bn business.”
Guess what? The share price has continued to decline, setting new records as it slowly slides into the abyss. As I write on Thursday, Lloyds shares closed at 24.58p. This means that they’ve dived a further 21.5% since I first picked them from the FTSE 100’s bargain bin.
Of course, the protracted decline of the Lloyds share price has also dragged down the bank’s market value. Today, the UK’s largest retail bank is worth a mere £17.4bn, which makes it an absolute minnow on a global scale. By comparison, America’s largest bank, JPMorgan Chase, is worth $282bn (and that’s after a 33.5% fall in 2020).
Lloyds shares have been a serial disappointment
I haven’t owned Lloyds since the early days of the global financial crisis of 2007/09. What’s more, I’m delighted with my decision, because the Lloyds share price has done nothing but disappoint its shareholders. Here’s how it has has performed over several timescales:
- One week -7.5%, one month -14%, three months -22.3%, and six months -34.5%. Then one year -54.7%, two years -60.3%, three years -63.6% and five years -66.3%.
As you can see, over every one of eight time frames ranging from one week to five years, the Lloyds share price has fallen. Even worse, it’s crashed by two-thirds in the past five years. That’s really brutal for Lloyds’ loyal and long-suffering shareholders.
I see a lifetime of value in Lloyds
Of course, we all know why the Lloyds share price has been hit for six. This is probably the worst time since 1945 to be a leading lender here in the UK. Covid-19 has devastated the UK economy, threatening the survival of countless businesses. What’s more, emergency cuts to the Bank of England base rate (from 0.75% a year to 0.1%) have slashed Lloyds’ lending margins.
Then again, just a reminder that the entirety of Lloyds is worth just £17.4bn. For this modest sum, you could buy a ‘Big Four’ clearing bank with over 30 million customers. Today, I’d happily pay this sum (if I had it) to buy Lloyds outright. To justify this price tag, all I would aim to do is make, say, £600 from each customer over the coming decade. I think that’s not much of a stretch target and could indeed be possible.
Right now, the Lloyds share price is just 4.2% above its 2020 low of 23.59p, reached last Tuesday (22 September). I suspect that this is still too low – even if Lloyds were to make a hefty loss in 2020 and not reinstate its dividend for another year. Today, I’d happily buy and hold Lloyds shares for life – but I’ve been repeatedly wrong since June and I could well be wrong again!
Cliffdarcy 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.