Image source: Getty Images
He Lloyd's (LSE:LLOY) share price, along with the broader price FTSE 100remains basically stable over the last 12 months.
If I had invested £10,000 in the UK's main bank in January, my 21,276 shares would be worth exactly what I paid for them.
But Lloyds paid two dividends worth a total of 2.52p per share in 2023. So my shares would have produced passive income of £536.13 for the year.
City analysts believe Lloyds will pay 2.76 pence in dividends per share in 2024. And then increase that figure again in 2025 to 3.24 pence per share.
At the current share price, this means very healthy returns of 5.8% and 6.9% over the next two years. This forecast has some investors looking at the black bank for a possible buy point.
edifying
Lloyds' share price has been stagnant for more than a decade. But there have been 14 interest rate rises in the UK since December 2021. As one of Britain's largest lenders, this means the bank has been able to improve its profit margins on the loans and mortgages it issues.
And Lloyds has been buying back large amounts of its own shares and removing them from the market. After £2bn of share buybacks in 2022, it has set aside another £1.15bn until April 2024. This suggests the board considers the current share price of 47p to be undervalued.
In theory, by reducing supply, share buybacks improve the price of each individual share that remains in investors' hands.
I can see that its price-earnings ratio of 6.5 is about half the average of the FTSE 100. This is much lower than its UK and European rivals. So Lloyds looks cheap at this price.
Greener pastures
Another advantage for Lloyds is that it has the best green credentials of any major UK bank. Don't rule this out just yet, as it could translate into higher sales in 2024.
Earnings per share will grow 73% between 2022 and 2024, City forecasters suggest.
And in September the University of Leeds transferred all its banking to Lloyds because “has the lowest investments in fossil fuels” from any UK bank.
Cambridge University, with £200m in assets, could do the same. Rival Barclays has managed the UK university for over 200 years. But that relationship appears dead and buried due to the bank's refusal to stop investing in oil and gas.
A new bank would earn around £10m in fees each year if it had products that didn't support it.expansion of fossil fuels”the university said.
In sum
The downside is that the UK appears to be close to a recession in 2024. This will likely reduce the number of loans Lloyds makes. Markets are pricing in around 1% of cuts next year, so the value of Lloyds' current portfolio may also fall.
There are also lingering doubts about the health of the banking sector after the crisis of March 2023. That led to the bankruptcy of US lender Silicon Valley, followed by Credit Suisse in Europe.
Lloyds' share price remains a matter of major disagreement. Some wouldn't touch it with a barge, while some of my motley fool Colleagues see it as a bargain.
With its new business potential and near 7% yield going forward, I think Lloyds has just made it onto my watch list.
