Lloyds (LSE: LLOY) shares seem to have stagnated over the past 30 days, currently sitting at 52p. However, broadening that horizon to six and 12 months, the shares have risen 12% and 39%, respectively.
Like most other stocks, this one was hit hard in March 2020 by the pandemic. But with encouraging growth since then, should I be considering buying Lloyds shares now? Let’s take a closer look.
Explaining the Lloyds share price
In 2020, global lockdown restrictions, alongside other measures, meant that many businesses had to shut their doors temporarily or permanently. Consequently, loan repayments became strained. This was bad news for lenders like Lloyds. As my fellow fool Zaven Boyrazian pointed out, it incurred a hefty £4.2bn loan impairment charge as a consequence of this.
However, the good news for Lloyds is that the economy has been steadily improving. This has helped push up its share price over the past year.
In addition to this, it has announced some pretty exciting growth plans. Through its newest venture, Citra Living, Lloyds is aiming to be the UK’s largest private landlord. What’s more, under new leadership from Charlie Nunn, the budget from this venture has quadrupled from £250m to £1bn.
In addition to Citra Living, it has planned to expand back into the wealth management and investment banking sphere. All of these moves came along with encouraging 2021 third-quarter income of £4.1bn for the first nine months. I think using these funds to expand Lloyds’ industry presence is a great move from management.
Risks for the shares
Although the shares have been able to benefit from the bounce-back of the UK economy, it’s now faced with a new problem. The Bank of England is in the process of raising interest rates to combat high levels of inflation. While this means that Lloyds can charge more on its loans, it also means the UK economy will slow in growth. This could be bad news for the shares.
In addition to this, analysts estimate for fourth-quarter results are significantly lower than third-quarter results. Net income is predicted to be over £200m lower than the previous period, with pre-tax profits falling by almost £800m. If these estimates prove true, then investors could turn sour on the stock.
Lloyds valuation
Trading with a forward price-to-earnings (P/E) ratio of 8.2, Lloyds shares look pretty good value to me at the moment. Comparing this to competitor HSBC, with a P/E ratio of 13.2, highlights this value further. In addition to this, the 2.3% dividend seems appealing to me.
Therefore, I like the look of Lloyds shares for my portfolio. I think that at the current share price, the bank offers great value, especially considering its expansive growth plans. Therefore, I am going to consider adding some shares to my portfolio today.
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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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