Is Lloyds Banking Group PLC an appealing share at 54p?

Could Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) deliver improving investment performance?

Lloyds Banking Group PLC
Lloyds Banking Group PLC

With the Lloyds Banking Group PLC (LON:LLOY) (LLOY.L) share price now trading at around 54p, I think that it could offer good value for money for the long term.

I’ve been impressed with the strategy employed by the business in recent years. It has been able to remove a significant amount of costs from its operations, with major headcount reductions contributing to a declining cost to income ratio.

Over the medium term, I wouldn’t be surprised if further cost reductions are ahead. It is focusing on its digital opportunities, while at the same time it is seeking to cut the number of branches in its network. This is in response to changing consumer demands in an increasingly digital world, but may also aid with the company’s overall efficiency drive.

Lloyds has also been able to put in place a stronger balance sheet in recent years in my opinion. It has performed relatively well versus some of its sector peers in recent stress tests, and this could help to offset its lack of geographical diversity ahead of the risks posed by Brexit.

In my opinion, Brexit could continue to have a downward impact on the bank’s share price performance. Investors appear to be cautious about the outlook for the UK economy, and these fears may ramp-up if the Brexit vote is defeated in Parliament. With the company due to increase EPS by 2% this year, its financial outlook in the short run is relatively subdued.

Therefore, I feel that the Lloyds share price could experience a challenging near-term period. It may slip lower than 54p in the near term. But with what seems to be a sound strategy in my eyes which has created a relatively efficient business, I’m optimistic about its capacity to deliver a rising share price over future years.

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 or use one of the other contact methods available on the 'Contact Us' page