I’m optimistic about the share price prospects of Lloyds Banking Group PLC (LON:LLOY) (LLOY.L), Aviva plc (LON:AV) (AV.L) and Standard Chartered PLC (LON:STAN) (STAN.L). All 3 companies have experienced difficulties in recent years and have adopted strategies which have begun to offer improving financial and share price performance.
However, I think Lloyds could be the best performer out of the 3 companies. I feel the Lloyds share price has a large margin of safety factored in which, while understandable given the uncertain outlook for the UK economy, presents a favourable investment opportunity in my view.
I also think there may be more scope for improvements in the Lloyds business in terms of its efficiency ratios and balance sheet strength. Although it has made good progress on its cost/income ratio and CET1 ratio in the last few years, it is targeting improvements in the next couple of years which I think could create a more sustainable and resilient business.
Aviva and Standard Chartered are of course making positive changes to their business models. Aviva is reorganising and could become more efficient and streamlined over the medium term. Standard Chartered is doing likewise and may be able to take advantage of growth potential in Asia. That’s a region I’m particularly optimistic about because of the forecast rise in wealth levels, which I feel could cause demand for financial products and services to increase.
However, with Lloyds having a P/E of less than 10 and dividend potential which I feel is among the most impressive of large-cap stocks at the moment, I think its investment appeal is greater than that of Aviva and Standard Chartered. A general election and Brexit talks may cause some uncertainty in future months, but I feel in the long run Lloyds shares could perform relatively well versus sector peers.