Why Lloyds Banking Group PLC is at the top of my watchlist

I’m keeping a close eye on Lloyds Banking Group PLC (LON:LLOY) (LLOY.L)

Lloyds Banking Group PLC
Lloyds Banking Group PLC

I’m taking a keen interest in Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) at the moment. I was impressed with its recent update and believe that it is one of the cheapest large-cap shares around at the moment. It has a P/E of less than 10 and a P/B of around 1.

I’m watching it closely because I think it could perform relatively well in the long run. I believe it has a good strategy which could help it to perform better than many investors currently believe.

For instance, it has one of the lowest cost to income ratios I can find among large-cap banking stocks at the moment. It is also in a stronger position after its asset disposals to my mind, which may help it if the outlook for the UK economy worsens.

On the topic of the UK economy and Brexit, I think there could be uncertainty in the coming months. I feel the UK leaving the EU is such a major change in both a political and economic respect that businesses and consumers could see their confidence in the outlook deteriorate to at least some degree.

However, I equally believe that with what looks set to be a supportive monetary policy and a possible boost from a weak pound, the UK economy could perform well in the long run.

This would be good news for Lloyds, since it is almost exclusively focused on the UK economy. It has a dominant position within the mortgages and current account segments in particular, and its acquisition of MBNA could act as a catalyst on its financial performance and share price in my view.

Therefore, I’m upbeat about the company’s long term potential. Although more volatility may be possible in the short run, I think the Lloyds share price could have investment appeal for the long term.

About Robert Stephens 2805 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page