Are Lloyds shares cheap buys at under 48p?

Lloyds (LSE:LLOY) shares started the year on a very positive note, rising over 14% by mid-February. However, the black horse bank has since given up the bulk of those gains. Why?

The primary reason behind the share price fall is turmoil that started in the US with the collapse of Silicon Valley Bank. Soon after, attention quickly turned to Switzerland when Credit Suisse also reached a crisis point. Now the focus is on Germany as concerns intensify regarding Deutsche Bank‘s involvement in the credit-default swaps market.

So, will FTSE 100 constituent Lloyds be next if contagion fears spread to the UK? Or is the sell-off in Lloyds shares short-sighted, making today a good buying opportunity? Here’s my take.

Solid fundamentals

Despite a gloomy backdrop, I think Lloyds’ recent results reveal plenty of reasons to be confident in the banking group’s prospects.

The pro forma CET1 ratio, which measures a bank’s capital against its risk-weighted assets, is a healthy 14.1%. Although lower than 2021’s figure of 16.3%, the ratio is still well above the bank’s 12.5% target. In my view, it’s sufficiently robust to ensure Lloyds’ ability to withstand financial distress.

What’s more, the group’s net income rose 14% in FY22 to hit GBP18bn. Underlying profit before impairment charges also increased by 46%. In addition, the net interest margin continues to expand, aided by tightening monetary policy.

Source: Lloyds FY 2022 Results

I’m also encouraged by CEO Charlie Nunn’s focus on attracting affluent customers — essentially anyone earning more than GBP75,000 or with the same amount to invest.

Increasing the number of customers with this kind of financial profile has the potential to add significant shareholder value. With ambitions for an expanded offering spanning tiered savings, flexible lending options, and bespoke benefits, I’m excited to see whether the group can successfully achieve its aim over the coming years.

Macro risks

In my view, the biggest risks facing the Lloyds share price are broad macro risks rather than company-specific concerns. After all, the stock market is renowned for its emotional investing cycles and there’s a chance that Lloyds could be caught up in big sell-offs affecting the entire banking sector.

Although Bank of England governor Andrew Bailey sought to calm nerves by saying the current situation is “very different” to the 2007-08 financial crisis, he did concede the regulator was in a period of “very heightened tension and alertness”. This suggests we’re not out of the woods yet. I believe Lloyds is a better-run bank than the various casualties of the crisis so far.

After all, the group’s liquidity coverage and asset portfolio both look healthy. Nonetheless, the possibility of further market panic is a very real one, especially if more big lenders go under.

A cheap stock to buy?

I already own Lloyds shares. My average traded price is not dissimilar to where the shares are today.

Due to a 5% dividend yield and encouraging financial results on top, I’ll be holding my position. However, heightened macro risks make me reluctant to buy more at this stage. I don’t think the share price is sufficiently cheap today to justify adding to my position.

Instead, I’ll sit tight and see how this rapidly evolving situation develops.

Tags:

healthspan listed on couponmatrix.ukkukoon-rugs listed on couponmatrix.uksky listed on couponmatrix.uksquarespace listed on couponmatrix.uktesco listed on couponmatrix.ukthe-montcalm listed on couponmatrix.uk
healthspan listed on couponmatrix.ukAs the UK's largest supplier of nutrition, vitamins and supplements, Healthspan have already established a reputation for quality healthcare, pet health goods and skincare. With the a Healthspan voucher code you can save on supplements, performance-enhancing proteins and plenty more to ensure you're at your best physical condition for the smallest possible price. Whether you're looking to relieve symptoms of a medical condition, improve the condition of your skin or hair, or looking to bolster a healthy diet with essential vitamins, Healthspan has what you need.
kukoon-rugs listed on couponmatrix.ukA rug can do more for transforming a space than just about anything. From shabby chic rugs for a boho vibe to stylish geometric rugs to add an artistic touch, Kukoon Rugs has it all. Check out the indoor and outdoor rugs available to suit rooms and gardens of every size. If you shop with a Kukoon Rugs discount code, you’ll always get your home furnishings for the best price. With free delivery, 90-day returns and some great prices to boot, Kukoon Rugs should be at the top of your list for a home makeover.
sky listed on couponmatrix.ukThere are certain things that we would struggle to live without these days: the internet, decent TV, and mobile phones are pretty high on the list for everyone. We are also pretty keen on finding the best deals out there - make the most of a Sky offer code and enjoy great discounts on your plan! Sky offer a wide range of services including award-winning TV Channels as well as great broadband and mobile packages that will help you link your devices and subscriptions quickly and easily.
squarespace listed on couponmatrix.ukAnyone can create a beautiful website with Squarespace. With stand-out templates, handy website tools and ’round the clock customer support, it’s the stuff web designers once dreamed of. At Groupon, we monitor all the live Squarespace promo codes and offers, so if you’re looking for a discount on your Squarespace plan, you’re in the right place! Dream up the perfect website with Squarespace, and let Groupon make the money-saving part simple.
tesco listed on couponmatrix.ukTesco is the number one stop for groceries – and so much more – for millions of people across the country. Convenient, open 24/7, complete and clear, Tesco Direct will change the way you shop! So, bag some Tesco offers today and start the best grocery trip of your life! Discover all the brand has to offer, and enjoy incredible savings across fruit and veg, cupboard essentials and treats for the whole family. Every little really does help!
the-montcalm listed on couponmatrix.ukWhen you want modern luxury combined with a timeless aesthetic, you’ll find few better option than The Montcalm hotels. Designed to be as comfortable as they are wondrous, there are over half a dozen hotels across London to book for a bargain with the latest Montcalm discount code. With high-class food to indulge in, delicious wines to taste and spacious rooms in which to unwind, class and comfort exude from every element of The Montcalm hotels. If The Montcalm is always first on your mind when looking for overnight accommodation in London, then you could save dividends by signing up The Montcalm Club. Completely free to join, The Montcalm Club gives all its users a 10% discount when booking directly with the hotel, a saving that can seriously scale with multiple visits. Top that with the ability to earn extra perks – such as complimentary upgrades, special in-room facilities and member-only offers– and you’ve got a no brainer for any Montcalm fan. The Montcalm is always providing new ways to give customers even better value from their investment, be it by pairing services together at a reduced rate or offering percentage discounts on consecutive stays. On the odd chance you don’t find an offer to suit your stay, turn to Groupon for a Montcalm promo code that’ll guarantee a great price on your booking. So if you’re fancying a little extra pampering whilst visiting, see if you can pair your room with a massage or three-course meal at a discount.