The last decade has been exceptionally tough for the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price. Having slumped to a low of around 25p following the financial crisis, it delivered a period of growth so that it reached almost 90p in 2015.
Since then, though, fears surrounding the prospects for the UK economy seem to have dampened demand for the bank among investors. Now, it trades 35p below its post-credit crunch high. This means it would need to rise by over 60% to reach its highest price level since the financial crisis.
In the near term, it feels as though growth of any kind would be difficult for the bank. The UK economy is facing an uncertain period, with the vote on Brexit due in less than a week. To my mind, there seems to be limited potential for Theresa May’s deal to pass, and this could cause further uncertainty for UK-focused shares.
As a result, I wouldn’t be surprised if the Lloyds share price experiences a period of further difficulty in future months. This could even mean that its market value moves closer to 50p.
In the long run, though, I feel that it has the potential to make new post-credit crunch highs. It trades on a P/E ratio of around 8, and has a strategy which I believe could catalyse its financial performance. It is investing heavily in acquisitions, digital growth and in reducing its costs. All of these changes could create a stronger business which is better able to deliver rising profitability in the long run.
Sure, Lloyds could be impacted negatively by fears surrounding Brexit. But in the long run, I think that a low valuation and the changes it is making to its business model could help it to outperform its wider industry and FTSE 100 index peers over future years.