Lloyds Banking Group PLC: is the next stop 40p per share?

Could continued declines be ahead for the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price?

Lloyds Banking Group PLC
Lloyds Banking Group PLC

Having now fallen to 50p per share, the prospects for Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) do not seem to be particularly bright. The bank has declined by 26% since the start of 2018, with fears surrounding the prospects for the UK economy appearing to weigh on its investment performance.

To my mind, those same uncertainties are likely to remain in play during the first half of 2019. In the first quarter of the year, there looks set to be a significant amount of political wrangling about the various Brexit deals that may be on offer. This could lead to investors deciding that even larger margins of safety are required for UK-focused shares.

In the second quarter of the year, Brexit is due to become a reality. Naturally, this may mean that investors are cautious, since it is a one-off event which, ultimately, nobody quite knows how it will proceed.

As a result, it wouldn’t surprise me if the Lloyds Bank share price moves closer towards 40p in 2019. At the same time, though, I think that it could offer impressive total returns in the long run. It seems to have a sound growth strategy according to my research, with it having put in place a relatively efficient business model that has been able to post improving profitability in recent years.

Alongside this, I feel that the company offers good value for money at the moment. It has a P/E ratio of around 7, while a 6%+ dividend yield indicates to me that it may offer a margin of safety. Although it may take time for its intrinsic value to be delivered in the form of a higher share price, I feel that Lloyds could offer recovery potential in the long run. But the first half of 2019 could prove to be volatile for the stock.

About Robert Stephens 5430 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