Is Lloyds Banking Group PLC’s strategy set to catalyse its stock price?

Could Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) enjoy improving share price prospects?

Lloyds Banking Group PLC
Lloyds Banking Group PLC

The Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price has experienced a volatile year so far. In my view, it may have been impacted by uncertainty surrounding the UK’s economic outlook, with investors potentially becoming less confident in the outlook for a stock which generates almost all of its income from the UK.

As a result, the bank now has a P/E ratio of around 8 at the moment. This suggests to me that it could offer a margin of safety, with it seeming to have a lower rating than many of its FTSE 100 industry peers.

Clearly, Brexit has the potential to cause further uncertainty. A deal has not yet been done between the UK and the EU. Even if an agreement is struck, investors may remain nervous about the performance of the UK economy ahead of what is a unique event.

This could mean that the Lloyds share price is held back to some degree over future months in my view. However, I feel that its long-term prospects remain relatively bright. One reason for this is its strategy. It is focused on becoming more efficient, while also increasing its digital growth and boosting customer service levels.

In my view, investment in digital opportunities is a logical step, with the bank set to deploy up to £3 billion of capital in this area. Customers are demanding slicker mobile apps, while branches are becoming less popular.

This could enable the company to improve efficiency through closing branches, while also giving customers what they want. And since the cost of digital growth opportunities may be high over a sustained period, the bank could strengthen its market position versus smaller, challenger banks.

Due to this, I’m optimistic about the long-term prospects for the Lloyds share price. While uncertainty and volatility may remain high, I feel that it could generate improving performance in future years.

About Robert Stephens 5138 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 [email protected] or use one of the other contact methods available on the 'Contact Us' page