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Home / Special Reports / Lloyds Share Sale Cancelled

This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.

11 October 2016

Lloyds Share Sale Cancelled

With the UK government deciding against a retail offering of Lloyds shares to the British public, there are nonetheless a wealth of tradable opportunities available to those wanting a slice of the bank on the stock market. We’re here to help you weed these out and capitalise on them; whether you’re a long term investor or a short-term trader, there are a range of options available to you today.

New Chancellor, New Direction

Phillip Hammond, the new Chancellor of the Exchequer, has cancelled his predecessor’s attempted apology for the taxpayer having to bail out the banks in 2008. George Osborne had planned to sell the Treasury’s remaining 9% bailout stake in Lloyds to private investors at prevailing market price with a 5% discount as a sweetener. Many of the several hundred thousand potential investors that expressed interest in purchasing these discounted shares are understandably upset.

But they needn’t be. Not when the market is offering the same shares at an even greater 40% discount!

Lloyds shares are currently trading marginally above the 50p mark, well below the predetermined 73p breakeven mark set out by Mr. Osborne as the minimum for a private sale. It begs the question: If you’d been waiting for much of this Summer, hoping for price to return to breakeven, just to get your 5% discount, why not capitalise on the potential 40% upside available to you today at current market prices?

Looking to the Future

Hammond’s new plan to gradually dispose of the remaining 6.5 billion Lloyds shares in the market comes from a preference to deliver a full reprivatisation under the radar, rather than making a song and dance with a retail offering while markets get to grips with Brexit. What does this mean?

It means that a measured and orderly sell down of shares back onto the market will take place, fully reprivatizing the bank within 12 months. Finally. There may be some overhang as a steady flow of Lloyds shares rejoin the market, potentially pressuring the share price. The silver lining to this, however, is that it will only stand to improve liquidity of the shares over the next year. The government may start  by selling shares around their lows, but this also allows you to buy around the lows in order to benefit from a greater potential upside should the share price rally.

So, it’s time to act, but what will your next course of action be? Buy or sell?

In the next section, we look at City analysts’ recommendations for the future performance of Lloyds shares over the next 12 months and our own Accendo analysts provide their technical analysis.

Page: 01

Lloyds Banking Group (LLOY): 3 Months; 4-Hourly

 Lloyds Banking Group PLC (-)

Will shares rise towards August highs of 63p (+19%) or fall towards July lows of 47p (-11%)?

  • Post-Brexit uptrend
  • Bounce from 2-month lows
  • Long lower tails

 

Broker Consensus: 43% Buy, 32% Hold, 25% Sell

Bullish: AlphaValue, Buy, Target 87.2p, +65% (6 Oct)

Average Target: 59.7p, +13% (11 Oct)

Bearish: Bernstein, Underperform, Target 40p, -24% (4 Oct)

 

N.B. All pricing and consensus data was sourced from Bloomberg on 11 Oct. Please contact us for a full, up to date rundown.

Page: 02

To get your hands on the newly-released Lloyds shares you need to have access to the stock market and Accendo Markets is here to help you.

We don’t make the market. Instead of having someone else choose the price you pay for Lloyds, we allow you to invest directly in the stock market, paying the official market price.

Even better, we offer leveraged products, such as CFDs, a flexible alternative to traditional shares that is currently exempt from UK stamp duty. CFDs could help you increase your profit potential whilst also allowing you to take either short-term or long-term positions in Lloyds depending on your share price predictions.

Think the price will rise? Take a long (buy) position. Think the price will fall? Take out a short (sell) position. CFDs allow you to take either stance.

Back to the highs?

If your belief is that the Lloyds share price will increase in the near term, you can open a long position using CFDs. Instead of an investment in traditional shares that would cost you £10,000 plus commission, a CFD requires just a 5% deposit, allowing you the same exposure for only £500.

For example, if you believe that Lloyds’ share price might return to post-Brexit highs of 62p (+17%), with just a £500 investment the potential return would amount to almost £1700 (or a phenomenal 240%). Of course, it should be noted that a movement in the opposite direction would result in losses of equal proportion.

Alternatively, you may have a longer term view for Lloyds’ share price; once again, only a 5% deposit is required compared to a full investment requirement in traditional shares for identical exposure. Subsequently, should the share price return to 2016 highs of 74p (+40%), you could achieve a potential return of £3960 before fees. Once again, note that a fall of equal size would result in losses of the same amount.

Overnight financing fees for CFDs account to only 3% per annum, meaning in this example you would incur a fee of only £0.68 per night.

Profits in both directions!

On the other hand, if you feel that the Lloyds share price might decline, CFDs also allow you to take a short position on the share price, making a return on any subsequent fall.

For example, if you believe that the share price will fall from the current 53p to the most bearish analyst’s target price of 40p, a £500 investment allowing you £10,000 worth of short exposure which could result in a return of £3250. Although note a share price rally would result in proportional losses.

Whatever your stance on the future of Lloyds share price in the short or long term, whether negative or positive outlook, Accendo Markets can offer you a suitable trading opportunity

Page: 03

This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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