This year has seen the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price fall from 68p to its current level of around 57p. While it delivered gains in the first part of the year, recent months have seen it fall without showing signs of a sustained comeback.
One reason for this could be the challenges facing the UK economy. Brexit uncertainty seems to be causing consumers and businesses to hold back to at least some degree on spending and investment. The impact of this could be weaker growth, as well as declining investor sentiment towards companies which rely upon the UK for the majority of their income.
Lloyds may fall into that bracket, and this means that its EPS growth prospects for next year are relatively limited in my view. It is expected to report a rise in EPS of around 2%, which suggests that its operating environment is not particularly favourable.
That said, the bank recently released an update which I believe could offer the potential for a successful turnaround. The company’s increasing investment in its digital offering could lead to a more efficient business, with branches being closed. This may also provide the bank with a higher degree of customer satisfaction, with people increasingly demanding banking via mobile apps rather than through a branch.
With Lloyds facing increasing competitive pressure as well as evolving technology, I think that its relatively low cost to income ratio could act as a foundation for future growth. It has also been able to strengthen its balance sheet in recent years in my view, and this could lead to improving financial performance in the long run.
Since the stock now has a P/E ratio of around 9, I feel that it could offer good value for money. Although further share price falls cannot be ruled out, I’m optimistic about its long-term investment potential.