Is Lloyds Banking Group PLC A Better Investment Than Barclays PLC, HSBC Holdings plc, Prudential plc And Aviva plc After Full-Year Results?

Does Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L) have more investment appeal than Barclays PLC (LON:BARC) (LSE:BARC.L), HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L), Prudential plc (LON:PRU) (LSE:PRU.L) and Aviva plc (LON:AV) (LSE:AV.L)?

Lloyds Banking Group PLC
Lloyds Banking Group PLC

Lloyds Banking Group PLC (LON:LLOY) (LSE:LLOY.L) has released full-year results for 2016 to investors today. Investors seem to be encouraged by the results since Lloyds’ share price is 3.25% higher at the time of writing.

Its underlying profit was £7.9 billion against £8.1 billion in 2015, while statutory profit has more than doubled to £4.2 billion. Its investment in improving the customer experience is paying off in my view, while its investment in reducing costs has led to a fall in operating costs of 3%. Lloyds has a market-leading cost:income ratio of 48.7%, with positive jaws. A cost:income ratio of 45% is being targeted for 2019.

Its asset quality remains strong, with no deterioration in the underlying portfolio. Lloyds’ balance sheet remains sound in my opinion, with a pro forma CET1 ratio of 13.8%, which is higher than at 31 December 2015 when it was 13%. Its net interest margin was 2.7% and is expected to remain at a similar level of 2.7% in 2017.

Lloyds has increased dividends by 13% to 2.55p per share for the full year. It has also recommended a special dividend of 0.5p per share for 2016. It expects to generate 170-200 basis points of CET1 capital per annum, which should help to further strengthen its balance sheet in my opinion. Its asset quality ratio for 2017 is expected to be around 25 basis points before the impact of the acquisition of MBNA’s prime UK credit card business.

In 2017, Lloyds has been a good investment in my view. Its share price has risen 10.5%. That’s ahead of other financial services stocks such as Barclays PLC (LON:BARC) (LSE:BARC.L), HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L), Prudential plc (LON:PRU) (LSE:PRU.L) and Aviva plc (LON:AV) (LSE:AV.L). Aviva’s share price is 5% higher, Barclays has risen 7%, HSBC’s stock price is 2% higher and Prudential’s shares are up 0.5% in 2017.

In my view, Lloyds has significant investor appeal. I think its 2016 results show it continues to make solid progress, with its investment in customer service and cost reductions having an impact on its profitability and overall performance. I feel investors should be encouraged by its update and I believe it has relative investment appeal compared to other banks such as Barclays and HSBC, while I think its rising dividend and improving balance sheet also make it a sound investment versus Aviva and Prudential.

Overall, I’m optimistic about Lloyds as an investment and think there is share price growth potential in the long run.

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