Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why I Love Owning Shares in Lloyds Banking Group

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

LONDON -- Lloyds Banking Group  (LSE: LLOY  )   (NYSE: LYG  )  was the best performing FTSE 100 share in 2012. The shares have already had a strong start to 2013, rising 8%. In comparison, the FTSE 100 is up 6.6%.

The bank and its management have received significant criticism in recent years. However, I am proud to back them and continue to hold my shares for the recovery.

I bought my shares in Lloyds in 2011. This trade was based on my conviction that the shares were cheap, provided no further fundraising would be required. Lloyds was then hit by a series of negative developments. First, the company had to set aside billions of pounds to compensate customers that had been missold Payment Protection Insurance (PPI). Then, its overworked and exhausted chief executive Antonio Horta-Osorio was forced to take sick leave in November 2011. This led many investors to speculate on whether he was up to the challenge. Just as things looked as though they could not get worse, the crisis in the eurozone was building to a crescendo.

Lloyds spent 2012 getting back on track. Although further PPI provisions were required, they were far below the costs that were incurred in 2011. Mr. Horta-Osorio returned to his desk and spent the rest of the year proving people wrong. I am delighted to back him.

The bank also reported significant reductions in loan and asset impairments. Now investors are beginning to speculate on how much Lloyds will make, rather than lose, in 2013.

Potential upside
Although Lloyds has had a good 2012 and 2013, significant further rises are still possible. Don't forget, the Lloyds share price spent much of 2010 over 60 pence. That is 15% ahead of today's price.

Some commentators think Lloyds could move even higher. Douglas MacNeill, investment director at broker Charles Stanley, had this to say: "If Lloyds can put its problems behind it, then it might just be able to get toward the kind of premium to book value that the best banks enjoy: around 20%. That would put a price of about 70 pence a share on the agenda."

Whatever happens from here, investors that had backed the bank to recover in 2012 made a handsome return. Correctly choosing recovery plays is one of the quickest ways to make big returns from shares. If you want to learn more on how the stock market could help accelerate your wealth, get the free Motley Fool report "10 Steps to Making a Million in the Market." The report is 100% free and will be delivered to your inbox immediately. Simply click here to start learning today.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2225303, ~/Articles/ArticleHandler.aspx, 9/29/2016 6:24:03 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 5:55 AM
LLOY $56.00 Up +0.47 +0.85%
Lloyds Banking Gro… CAPS Rating: No stars
LYG $2.98 Up +0.06 +2.05%
Lloyds TSB Group CAPS Rating: ***