The Lloyds share price is rising despite a big PPI hit. I might buy more

first_imgSimply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares Alan Oscroft | Thursday, 20th February, 2020 | More on: LLOY Lloyds Banking Group (LSE: LLOY) has reported a 26% fall in pre-tax profit for 2019, to £4.39bn. That’s down from £5.96bn a year ago, and a bit below analysts’ forecasts.Profits were hit by a hefty PPI charge of £2.45bn, bringing the total cost of the mis-selling scandal to £21.9bn. With that uncertainty finally settled, investors seem to have gained a little more confidence, and pushed the Lloyds share price up 3% in morning trading.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…Lloyds put underlying profit at £7.5bn, down 7%, in what it called “a challenging external market.” But chief executive Antonio Horta-Osorio described 2019’s underlying performance as “resilient, reflecting the health of our customer franchise and the strength of the business model.”In other headline news, the CEO’s pay package was cut by 28% to £4.73m, and the firm’s staff bonus pool has been pared by a third.BrexitInvestors fear economic pressure could hurt Lloyds profits further, especially if the UK’s Brexit trade negotiations turn sour. And right now, the noises coming from our negotiation partners aren’t encouraging. It could hit mortgage lending and business credit, and perhaps even impact on our precious dividends.But for 2019, at least, things didn’t look too bad. Lloyds posted growth of £3.5bn in its open mortgage book, though that does include September’s acquisition of Tesco Bank’s mortgage portfolio. Retail current accounts were up £3.2bn too.Lloyds lifted its annual dividend 5%, to 3.37p per share. That’s bang in line with expectations, and amounts to a yield of 5.9%. I’m reasonably happy about that, even though it was only thinly cover by reported earnings per share of 3.5p.CautionBut I’m cautious of complacency, as there’s definitely a squeeze on cash available for shareholders. In 2018, Lloyds handed back £1.1bn in the form of share buybacks, but none in 2019. The buyback programme was halted when the scale of PPI costs started to become clear.But if I had uncertain debts ahead of me, I’d be holding back on any expense as hard as I could until I knew exactly how much I’d have to pay. So I do wonder if the bank should have been more conservative with the cash a bit earlier.I also think Lloyds might have done better by reintroducing its dividends a bit more gradually. As well as the financial cost, the banking crisis was hugely embarrassing for the banking sector as it screamed incompetence. There was clearly pressure to show a rebound to health, and rapid dividend growth was part of that. But maybe that was more short-term thinking.OutlookAddressing the bank’s outlook, Horta-Osorio said: “Uncertainty remains given the ongoing negotiation of international trade agreements and the rate outlook remains challenging.” And I see a tension there with analysts’ forecasts taking the dividend yield up to 6.5% by 2021.I wouldn’t be surprised to see Lloyds dividend held flat for a couple of years, and I think that might be a wise move for the long term. Either way, even with a tough economic outlook, I still see Lloyds shares as a buy. Enter Your Email Address The Lloyds share price is rising despite a big PPI hit. I might buy more I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. 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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. “This Stock Could Be Like Buying Amazon in 1997” 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. See all posts by Alan Oscroftlast_img read more

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