Lloyds Bank invests in Fintech and nature restoration but are its shares worth buying?
Will Lloyds’ initiatives boost its share price and make it an attractive ISA investment?
Lloyds Bank invests in Fintech and nature restoration but are its shares worth buying?
Lloyds Banking Group, one of the largest retail and commercial banks in the UK, has recently made several investments aimed at improving financial wellbeing and sustainability.
Will this initiative boost its share price, though, and make it an attractive ISA investment?
Lloyds Bank has made several strategic investments and initiatives that align with its focus on technology, sustainability, financial inclusion, and shareholder returns. The bank has invested £3 million in Coadjute, a fintech company specializing in property technology, to help mortgage lenders manage lending risks. This investment reflects Lloyds' commitment to using technology to offer better financial services to its customers.
In addition, Lloyds is contributing £250,000 towards British nature restoration projects, demonstrating its dedication to supporting sustainability initiatives and addressing climate change. The bank has set ambitious emissions reduction targets and aims to cut the carbon emissions it finances by over 50% by 2030.
Lloyds has also increased its annual donation to its charitable foundations, the Lloyds Bank Foundation for England and Wales and the Bank of Scotland Foundation. This increased funding highlights the bank's focus on financial inclusion and building resilience in communities.
Furthermore, Lloyds is partnering with ApTap, a budgeting app, to develop a bill management tool for customers. This collaboration will provide account holders with more visibility into their regular outgoings and will eventually be integrated into the bank's mobile banking application.
Despite these positive developments, there are some downside risks to consider. Lloyds shares tend to be influenced by the UK economy, which fell into a recession in late 2023. While some investors believe that the worst is behind the UK economy, others are concerned about potential inflation and a deeper recession, which could impact Lloyds' share price.
Another risk is the ongoing investigation by the Financial Conduct Authority (FCA) into motor finance mis-selling. Analysts suggest that Lloyds could face a fine of up to £3.5 billion, significantly higher than the £450 million provision it has made so far. Such a fine would negatively impact profits and the bank's share price.
Analyst expectations and recommendations
Despite these risks, analysts have positive expectations for Lloyds Bank. The bank increased its cash payouts by 15% last year and aims for steady and sustainable dividend growth. Projections estimate a further increase in the dividend payout this year and next year, with a yield of approximately 6.8% at the current stock price. The dividend payout appears sustainable relative to profits, indicating a low risk of near-term dividend cuts.
Additionally, Lloyds is conducting share repurchases, which can boost earnings per share (EPS) over time and potentially increase the value of existing shares.
Overall, Lloyds Bank's investments and initiatives demonstrate its commitment to technology, sustainability, financial inclusion, and shareholder returns. However, it is important to consider the downside risks associated with the UK economy and the FCA investigation.
Fundamental analysts are rating Lloyds as between a ‘buy’ and a ‘hold’ with Refinitiv data showing 4 strong buy, 6 buy, 5 hold, and 2 sell - with the mean of estimates suggesting a long-term price target of 57.57 pence for the share, roughly 10% above the share’s current price (as of 2 April 2024).
Technical analysis on the Lloyds share price
The Lloyds’ share price saw six consecutive weeks of gains take it to its mid-March 52.66p peak before a minor consolidation phase kicked in.
A rise above the 52.66p March high remains on the cards with the February 2023 high at 54.34p and the January 2022 peak at 56.00p remaining in focus.
Lloyds Weekly Candlestick Chart
Slips should find support between the March and September 2022 as well as April 2023 highs at 50.68p to 49.85p.
Lloyds Daily Candlestick Chart
Further down lies the December 2023 peak at 48.38p which represents another possible support level.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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