My latest investment – Lloyds Bank

As part of my investing strategy, I like to pick 1 new equity holding per year that will be a long term investment and built upon every month to achieve a dollar cost averaging holding. For 2019 this equity pick is Lloyds Bank.

Lloyds is the largest retail bank in Britain and currently offer the following range of products:

– Current accounts – Credit cards – Savings – ISA – Mortgages – Loans – Car finance – Insurance – Share Dealing

As you will see it does not have any investment banking or trading services that are seen as higher risk to a banks overall stability. The only product it offers that I don’t like is the car finance. This is because personal contract plans have fuelled a large increase in new cars in the UK, and there is potentially a miss-selling scandal related to this upcoming.

Its over 10 years since the banking crisis where Lloyds was forced to buy HBOS. The UK government sold there final holding of shares in 2017. The UK PPI scandal is also finally coming to an end with final claims due in August 2019. Additionally I believe that UK equities are being held down by the uncertainty of Brexit. In my opinion, Lloyds should not be impacted by Brexit as it is a UK focussed bank.

Reasons for investing

Net Profit Margin = 27% Dividend Yield = 5.5% PE ratio = 10.5

I see Lloyds as a dividend/income stock rather than a growth stock. I am not expecting growth from the company like you would from a challenger bank.

I am hoping for stable and consistent revenue, with improving margins through automation resulting in increasing cash generation. This should result in regular growing dividends and returns to shareholders

The improving margins will come from IT, new technology integration and branch rationalisation. There is a lot of interesting fintech in the UK, and these developments will enable Lloyds to improve current products.

Investments will be made at a rate of 100 per month to produce a dollar cost average. This is a stock that I intend to hold onto long term. As with all investments, I will have a 20% stop loss as a safety net.


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