Lloyds Banking Group (LSE: LLOY) had a good day Wednesday, after a first-quarter update. The Lloyds share price ended the day 3.5% ahead.
And that kind of bullish feeling has been rare for Lloyds shareholders in recent years. I still have a way to go before I get my loss down to 50% since I bought my Lloyds shares, mind.
Lloyds shares are up 36% over the past 12 months, more than twice the gain of the FTSE 100 over the same period. But that does exclude the first couple of months of the stock market crash. If we look back to just before Covid-19 hit the markets, The Lloyds share price is still down 31%.
What did the Q1 update hold? My Motley Fool colleague Paul Summers covered the key facts and figures on the day. Here, I want to examine a few key points that I see as particularly important as an investor, both positive and negative.
Firstly, it’s good to see opening quarter pre-tax profit reaching £1.9bn. But I won’t get too excited by the size of the jump over the same period last year, given what was happening back then. To me, it’s more at the ‘I didn’t break my leg again today’ level of good news. Saying that, it did beat market expectations, and Lloyds achieving that hasn’t been too common an occurrence. If Lloyds can maintain this kind of profit, we could see a return to 2017 and 2018 strength.
Not in the clear yet
But I need a lot more than a single positive quarter to convince me that the Lloyds share price is set enter a period of strength. I’m not going to forget, for example, that profit took a dip in 2019, before the pandemic took hold.
Also, the bumper quarter was helped by a big improvement in Lloyds’ bad debt provisions. With the economic outlook brightening, the bank enjoyed a net impairment credit of £323m. An assumption that fewer people are going to fail to repay their debts is down to a change in short-term external conditions. It doesn’t really speak of any long-term improvements in the bank itself.
Still, I invested in Lloyds for the dividends, and I’m seeing encouraging developments on that front. The bank is still held back by PRA restrictions, and I can see Lloyds share price weakness continuing while they’re in force. But the bank said it’s “accruing dividends with intention to resume progressive and sustainable ordinary dividend policy.”
Lloyds share price finally recovering?
There were no dividend numbers, which was a little disappointing. And it raises the risk that Lloyds related ambitions might not match investors’ hopes. Forecasts suggest 1.68p per share for the current year, for a 3.7% yield on the current Lloyds shares price. There’s better out there, but that’s not bad. And, hopefully, it’ll be a precursor for sustained progressive dividends.
So what’s my overall feel on the Lloyds share price now? Well, once again, I’m looking at a hammered banking sector on the verge of what I’m hoping is, finally, a sustainable recovery. I’m not selling now, and I’d probably buy if I wasn’t already a shareholder. But I don’t think we’re out of the woods yet.