The government has announced that the sale of its remaining stake in Lloyds Banking Group to the public has been cancelled.
Instead, it will be sold in to the market over the next 12 months
Graham Spooner, investment research analyst at The Share Centre, believes the decision could act as a further drag on the share price in a sector that is already under pressure.
He said: “Like most other banks the group has been cutting jobs and branches in order to target £1.4bn of savings, invest in digital services products and target a 13.5-15% return on equity. They are now close to finishing the main restructuring, although there will be further branch closures.
“Analysts continue to highlight the pressure on earnings in the short to medium term. In recent updates they were able to spot some areas of improvement, such as a reduction in bad debts, lower costs and the bank is running ahead of schedule in achieving its cost base target of £10 billion, along with asset sales. There is also the hope for dividend payments in the future to grow significantly.
“The Brexit result again bought a focussed attention on the sector. This led to a raft of analyst downgrades amid concerns that the tentative steps to recovery have received a significant setback. Where this all puts Lloyds is difficult to access, although the share price is back to levels last seen in 2013. Its business is predominately UK and geared to the housing market.
“We continue to recommend Lloyds as a ‘hold’ for medium risk investors seeking growth.”