4 Good reasons why I am avoiding cheap actions of Lloyds like the plague!

There is no doubt that Lloyds banking group (LSE: Lloy) Actions offer tremendous paper value.

It looks like a bargain based on predicted profits: its relationship ratio to profits (p/e) is 9.3 times. The bank also offers a decent value in view of the predicted dividends, with its performance in a Ftse 100-Beating 5.2%.

Finally, with a price relationship to book (P/B) below one, Lloyds also quotes with a slight discount to the value of its assets.

But I don't see the price of Lloyds shares like a bright bargain. Rather, my opinion is that the Bank's cheap assessment reflects the high risk it represents for investors and their bad growth prospects that look towards the future.

Here are four reasons why I am avoiding the Black Horse Bank today.

1. Crescent Mortgage Competition

The recovery signs in the real estate market are great news for the largest mortgage provider in the United Kingdom. The demand for mortgage loans is recovering strongly as the buyer's confidence improves.

Mortgage approvals for housing purchases jumped 28% year after year in December, according to government data.

However, the margins in this key segment of products are falling apart as the competition intensifies. Santander and Barclays They have cut some fixed mortgage rates to less than 4% this week, while others are also cut in the middle of a race towards the bottom.

Lloyds will have no choice but to follow the flock, so that he does not lose new buyers and Re-Mortgagers to his rivals.

2. Margin pressures

The perspective for the margins of Lloyds is already quite bleak since the Bank of England (BOE) increases the cuts of interest rates.

The margins of net interest (Nims) at the group level were thin in the third quarter of 2024, with 2.94%. They hunt 21 basic points year after year, and could fall more abruptly if the reductions of the BOE rate are heated as the market expects. This would leave little or no space for earnings.

Experts suggest that interest rates will decrease to at least 4% at the end of December, below 4.5% today.

3. Economy in difficulties

On the positive side, rates reductions will probably boost Lloyds by supporting credit demand and spending on other financial products. They could also reduce the level of credit disability that the bank supports.

However, a gloomy perspective for the United Kingdom's economy suggests that it could still face problems on both fronts. The Boe's decision to reduce its growth forecasts from 2025 to half (to 0.75%) is a worrying omen.

With the Central Bank also tilting inflation to increase again, Lloyds faces a 'staplation' quagger that can damage the profits beyond this year. The main long -term structural problems for the economy of the United Kingdom include labor shortage, productivity drop and commercial tariffs.

4. Financial sanctions

The final, and perhaps the greatest threat, for the price of Lloyds shares in 2025 is the possibility of crushing charges of misconduct.

To recapitulate, the motor finance industry is subject to a probe of the Financial Behavior Authority (FCA) on the incorrect sale potential. After a judicial case last September, analysts believe that lenders could be in the hook of tens of billions of pounds.

As a leading industry player, Lloyds, who made cars for £ 15.6 billion in the first nine months of 2024, could be responsible for a large part of this. Capital of RBC Think that the cost for the bank could be a coat £ 3.9 billion, even if it takes into account that the estimates have moved higher in recent months.