That is a surprise! The price of Lloyds shares increased despite disappointing results

Well, I didn't expect that. He Lloyds banking group (LSE: Lloy) Price of the shares closed 4.9% higher February 20, after the bank published its results of 2024.

At one point, its stock rose 7.6%, after having established a new maximum of 52 weeks of 67.6p.

And yet, the bank did not meet the expectations of analysts about a series of key measures. In these circumstances, I would normally expect the value of the group to decrease. On the other hand, investors collectively decided that their market capitalization should be greater than £ 1.15 billion.

Earnings lower than hope

For example, the consensus of the analysts went to the income subsequent to the taxes of £ 4.64 billion. The bank lost this in £ 161 million (3.5%). In addition, with 12.3%, its capital performance used was 0.3 percentage points lower than the prognosis.

However, my biggest surprise is that investors seemed to ignore the increase in the amount reserved to cover fines and compensation derived from the investigation of the Financial Behavior Authority (FCA) about the alleged lack of lack of automobile finance.

Previously, the bank had estimated that it could have to pay £ 450 million. This has now increased by other £ 700 million, to £ 1.5 billion. However, it remains lower than £ 4.2 billion (or 6.9a of action) that an analyst recognizes that it will cost.

As the events have developed, we have seen how sensitive the price of the bank's actions with several judicial judgments, FCA ads and media reports. With disappointing profits and an increase in the provision of motor finance, he expected significant correction in the price of shares, especially because he has worked so strongly in recent months.

Egg on my face

But I was wrong. However, in a closer inspection, it is easy to see why investors reacted so positively. Despite the reduction of the base rate, it managed to register a net margin of 2.95%, which was in line with 'expert' predictions.

In addition, the bank increased its dividend. The payment of 2024 will now be 3.17p. This exceeded market expectations by 2.6%. Even with the results after the price of shares, the action has 4.8%. In addition, other £ 1.7 billion repurchases were announced.

However, I believe that future dividends and shares of shares could be threatened if the provision of motor finance should be further increased. When it is necessary to preserve cash, these are easy objectives.

But I think the price of Lloyds shares is not the treatment it was once. It has a price ratio to book (PTB) of 0.88. On paper, this suggests that the stock is cheap. However, according to McKinsey & Company, the average PTB ratio of 1,500 quoted banks is 0.9, the lowest of all sectors.

And their actions are now negotiated in a multiple of 10.5 times their profits of 2024. with all the Ftse 100The banks of the banks now report their results of 2024, it is possible to compile a table of price relations to profits (p/e), and Lloyds is at the bottom.

I think this reflects the recent rally of the price of shares instead that investors qualify the bank more than others. Lloyds depends almost completely on the national economy, and with the United Kingdom struggling to grow, I'm afraid that bank's future profits can disappoint investors. In addition, I have no idea what the final bill could be once the FCA completes its investigation.

For these reasons, I will not invest.