Lloyds (LSE: LLOY) shares started this year trading for 50p. And while they’ve been as high as 55p at times, today a share in the FTSE 100 bank will set me back only 46p.
With Lloyds rising 2% over the last 12 months, this drop makes me wonder whether it’s now a bargain. And if so, whether I should be loading up on some shares for my portfolio.
Bull case
There’s certainly a lot going for Lloyds right now.
First, interest rates were once again hiked in the UK this month following a Bank of England meeting. And with rates at 1.75%, this will benefit Lloyds.
This is because higher interest rates allow the business to charge customers more when borrowing from the bank. For Lloyds, this should hopefully see its revenues increase in the months ahead.
Another positive is the recent results the business released. With worsening economic conditions, it still managed to post a strong performance for the first half of 2022. Net income rose 12% compared to the same period for the year prior. And more generally, Lloyds upgraded its guidance for 2022, including for its net interest margin.
What also draws me to Lloyds is its dividend yield. This currently sits around 4.6%. And with inflation spiking to 10.1% for July, this passive income stream could prove handy to me in times ahead. While it’s not inflation-beating, it does offer a better return than many of its FTSE 100 peers.
The business also seems to be adapting to the times with its streamlining moves.
This comes predominantly in the form of branch closures, as it was recently announced that 48 Lloyds branches are to be closed by February 2023. While this is obviously not good news for those who lose their jobs or their local branch, with some of its locations seeing visits down as much as 85% in some cases over the last five years, this transition makes sense.
Bear case
With all this said, there are concerns I have with Lloyds.
To start, while rising interest rates could benefit the firm, higher rates may also see customers default on payments.
On top of this, a potential recession looming is a major worry for me. Lloyds has struggled massively in crises gone by, such as the financial crash of 2008. And quite frankly, it’s struggled to recover since then. Economic conditions are worsening as we head further into 2022, and this could mean the Lloyds share price slides further.
The firm is also the UK’s largest mortgage lender. And therefore, the current slowdown in the housing market could also spell trouble for the business. Higher interest rates and inflation have weighed on the market. Lloyds predicts house prices will grow just 1.8% this year. For 2023, it even expects a 1.4% fall.
Should I buy?
So at 46p, is now the time to buy?
I think so. Lloyds is set to face pressure in the months ahead. But at the current price, I’d happily snap up some shares. Its strong results show its resilience, which is key in times like these. Its dividend yield and rising interest rates also draw me to the stock.