The banking sector has been among the trailblazers in this reopening play currently dominating the market. While big banks such as Morgan Stanley, Goldman Sachs, and JP Morgan have been high-flying, surging about 30% since November 2020, there are still other overlooked stocks in the sector that have the capacity to run. One of such stocks is Lloyds, so this article can be a guide for those interested in buying Lloyds stock.
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Learn How to Buy Lloyds Stocks in 3 Easy Steps
Find a broker
Finding a good broker is the first step to acquiring shares of Lloyds. There are a variety of brokers out there, but you should find one whose services and costs appeal to you. Things to look out for when choosing a broker include the number of listed assets, the security of your funds, customer support services, research tools, etc.
Analyze the Lloyds stock price chart
Successful trading might require a blend of fundamental and technical analysis. Examining the price chart helps you to identify critical support and resistance zones. It enables you to time your entry and exit, which is necessary for risk control. So, make sure you analyze the price chart of Lloyds before trading it.
Trading goes beyond hitting the buy or sell button. It requires a well-thought-out strategy. You can trade the shares at market price or use a limit order. Have a defined entry and exit strategies, as this would reduce greed and minimize potential losses. Furthermore, you may decide to acquire whole units or fractional shares.
Lloyds company overview
Lloyds Banking Group plc is a British financial institution whose heritage extends over 320 years — dating back to the establishment of the Bank of Scotland by the Scottish Parliament in 1695. The bank is one of the UK's largest financial organizations servicing over 30 million customers and with a staff strength of 65,000 employees.
The Group is headquartered in London, but its operations span across the globe. The group operates under a number of distinct brands, including Lloyds Bank, Halifax, Bank of Scotland, and Scottish Widows. Lloyds Banking Group is listed on the London Stock Exchange (LSE) and is a constituent of the FTSE 100 Index. The banking group operates through three segments: Retail, Commercial Banking, and Insurance and Wealth. Lloyds has a market capitalization of $39bn.
Lloyds business model and revenue streams
Lloyds is a core banking firm that generates revenue through three segments: Retail, Commercial, and Insurance. The Retail segment offers a range of financial service products to private individuals and small businesses. The Commercial Banking segment provides lending, transactional banking, working capital management, risk management, term lending, and debt capital markets services to corporate clients. The Insurance and Wealth segment on the other hand offers life, home, and car insurance products, as well as pensions and investment products. The banking group generates revenue from insurance premiums, underwriting and consulting fees, interests charged on loans including return on investments.
Retail is the face of Lloyds Banking Group and generates much of the bank’s revenue. The bank is the UK's largest retail bank and mortgage lender by market share. As such, most of its revenue is generated from interest accrued loans especially to mortgage lenders. The bank has lent £11bn to over 285,000 businesses under government initiated COVID support schemes. Lloyds also benefited immensely from the surge in demand from home buyers since the start of the summer. Mortgage lending rose to its highest level since 2008. The improved forecast in real estate, along with a high loan repayment ratio (83%), made the bank reduce its provisions for future loan losses by $120m.
History of Lloyds
The origins of Lloyds Bank dates back to 1765, when button maker, John Taylor, and iron producer and dealer, Sampson Lloyd, set up a private banking business. Originally known as Taylor & Lloyd’s, both businessmen set up the first private bank in Birmingham and operated from a single office for almost a century (99 years). Taylors & Lloyds played a prominent role in financing trade and industry in Birmingham which was an industrial hub during the industrial revolution sweeping across Europe.
Following the demise of James Taylor in 1852, the “Taylor” was dropped from the firm's name because his sons were not interested in joining the business. The firm's name was subsequently changed to Lloyds & Company.
The need for additional capital led Lloyds to convert from a private bank to a joint-stock company in 1865 changing its name once again to Lloyds Banking Company Limited. In 1884, the bank absorbed the Lombard Street bank of Barnetts, Hoares, & Co. and adopted its famous black horse logo. In 1892, Lloyds acquired Twinings Bank, and in 1921, the bank secured its position as one of the ‘Big Five’ high street banks when it took over the Somerset bank of Fox, Fowler & Co. This was the bank’s largest deal until it acquired TSB eight decades later.
Lloyds has also been identified with innovative practices. The bank began employing Women in droves during the First World War as a replacement for the men who had gone off to fight. The bank was also vocal against the slave trade. Mr. Llyods, being a Quaker, was actively involved in the fight against the slave trade and sought its abolishment. The bank is also credited with introducing the first mechanized system of accounting procedures which had begun in the late 1920s but wasn’t completed until 1962.
In 1972, the bank installed the UK's first Cashpoint machine in Brentwood, Essex. This was the country’s first live ATM that issued variable amounts of cash and immediately debited the amount from the customer's account. Interestingly, in 1995, Lloyds merged with the Trustee Savings Bank in what is regarded as the bank’s largest deal. The bank operated as Lloyds TSB Bank plc between 1999 and 2013, before reverting to its original name.
Brokers that offer Lloyds shares
Shares of Lloyds can be bought from any broker with access to the New York Stock Exchange. However, to make things easier for you, we have shortlisted the best brokers offering Lloyd stock.
Should I invest in Lloyds stock?
Given the current rotation into value stocks and considering the fact that this is a theme that might dominate the market till the third quarter of this year, it is worthwhile to invest in Lloyds stock.
Lloyds stock investment potential
The financial sector remains one of the most undervalued sectors in the market, with many bank stocks trading at less than 15 times forward earnings estimates despite improving earnings growth outlooks. One of such banks is Lloyds. As the recovery play continues, investors would be searching for value stocks that have been overlooked by the market, Lloyds is primarily positioned to benefit from attention from bargain hunters looking for stocks with significant upside potential.
Better still, as the economy reopened, consumers would begin to spend and borrow more. Also, mortgage rates would rise as people would have more disposable income generated from wages and business. So, the bank would see its revenues increase since the bulk of it comes from accrued interest on retail and mortgage loans.
What kinds of investors should include Lloyds stock in their portfolios?
Because of its slow-paced price action, investors who should include Lloyds in their portfolios are those with a very long-term view. The bank is still trading below its pre-covid levels, and despite the exponential gains posted by other bank stocks, such as JP Morgan and Morgan Stanley, Lloyds has been somewhat sluggish in its rally. It would take a bit of fundamental news to put this stock above its current levels. As such, investors playing this stock would have to hold it for a pretty long time.
How much should I invest in Lloyds?
The amount one should invest in a stock differs as it depends on one’s economic status and investment experience. However, do not invest more than 2% of your portfolio in a single stock
How to buy shares in Lloyds stock?
Step 1: Determine out how much you’d like to invest
The first step is deciding how much you are willing to invest in the stock. Do you want to buy whole shares or fractional shares, and how many units do you want to buy? Be sure to invest only what you can afford to lose. Check the current price and choose the number of units appropriate for you.
Step 2: Open a brokerage account
If you’re new to trading, you would have to open a brokerage account. Opening an account is pretty simple, just make sure you pick the right account type based on your budget and investment needs. If you intend to trade in both directions, you may need to have a margins account.
Step 3: Place your trade
You can place “market” or “limit” orders depending on your trading style. It is advisable to always use a stop loss to minimize potential losses. Guard against greed and fear by sticking to your trading strategy, and lastly, it is best to have modest expectations of the stock.
Buy Lloyds shares using a broker
To purchase shares, you will need to do so through a broker. If you do not have a brokerage account, you will need to open one. Opening a brokerage account is an easy process, and provided one has all the required details and documents, you can open one immediately. The required documents include a valid identity card and proof of address.
Buy Lloyds shares with a direct stock purchase plan (DSPP)
Unfortunately, Lloyds shares cannot be purchased through a Direct Stock Purchase Plan.
Frequently Asked Questions
Yes, the stock is trading at a value.
Yes, Lloyds has a profitable business model.
Yes, you can, but you may have to wait for a long time.
There is no best platform as your trading needs and objectives influence your choice or preference for a platform.
Lloyds stocks are traded between 9.30 a.m. and 4 p.m. New York time when the market is open.
The stock is listed on the New York Stock Exchange and the London Stock Exchange.