In my view, the long-term prospects for the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price are relatively encouraging. I feel that the stock has been able to improve its financial strength since the financial crisis, and this may put it in a stronger position than some of its industry peers.
In addition, the investment it is making in its digital capabilities could strengthen its competitive position versus rivals. In an era where challenger banks have been grabbing new business from incumbents, I believe that Lloyds’ scale could mean that it is able to deliver a higher level of investment as customers demand more technological improvements from their bank.
Alongside this, the bank is seeking to become increasingly efficient in spite of having one of the lowest cost to income ratios in the FTSE 100 banking sector. And with there being the potential for further acquisitions in my opinion, the long-term growth prospects for the company seem to be sound in my view.
In the near term, there could be further uncertainty ahead. The Treasury is of the view that Brexit will be bad for the UK economy. As ever, forecasting has limited value in my view, and ultimately forecasts may or may not turn out to be accurate. In my opinion, a strong global growth outlook and an economy where employment levels are high and wage growth is above inflation may provide better operating conditions than are currently being priced in by investors.
Since the Lloyds share price has a P/E ratio of under 8 and a dividend yield of around 6%, I feel that it may offer a margin of safety at the moment. Therefore, although there could be further disappointment and disruption ahead in future months, I believe that the stock could post gains in the long run versus the wider FTSE 100.