How will Lloyds' business have performed in 2012? And will the results justify the spectacular performance of the shares?
Analyst consensus forecasts
I had a bit of a rant about analyst consensus forecasts in my preview of Royal Bank of Scotland Group's results, which are also due to be released next week. You can read what I had to say in that article, but the gist is that, on some occasions, the consensus is all but meaningless.
RBS is a case in point, and the same is largely true for Lloyds. For what it's worth, you can take your pick from the following earnings-per-share (EPS) consensus forecasts for Lloyds: 2.13 pence (Morningstar); 2.53 pence (Yahoo! Finance); 2.85 pence (Digital Look).
Tangible net asset value
I'd suggest you don't pay too much heed to earnings when you look at Lloyds' upcoming results, and concentrate instead on the tangible net asset (TNAV) per share number.
In my view, TNAV is the single most useful valuation number for banks at all times, but perhaps especially when they're recovering from a financial crisis and earnings are all over the place.
The table below show's Lloyds' TNAV per share at the end of each quarter since last year.
|Dec. 31, 2011
||March 31, 2012
||June 30, 2012
||Sept. 30, 2012
||Dec. 31, 2012
In terms of valuation, at a share price of 54 pence, Lloyds is trading at a 5% discount to TNAV per share on the Q3 balance sheet date of Sept. 30. The TNAV is, of course, five months out of date now, so the updated number in the upcoming results will give us an improved handle on whether the shares are trading at a discount, at par or at a premium.
At the nine-month stage, Lloyds gave guidance for the full year on several target numbers that you may want to check have been met:
- Net interest margin around 1.93%;
- Cost base close to 10 billion pounds;
- Impairment charge approximately 6 billion pounds; and
- Non-core asset reduction about 38 billion pounds.
Lloyds also expects to reach its long-term loan-to-deposit ratio target of 100% for the core business in Q1 of 2013, at the same time as reaching a 120% loan-to-deposit ratio for the group. As we're now well into Q1, keep an eye out for news on these targets.
Lloyds has also promised to provide an update on Payment Protection Insurance (PPI) mis-selling claims. News on the ultimate likely cost of the PPI scandal, for which Lloyds' current provision is 5.3 billion pounds, is something to watch for.
Finally, the Lloyds' board may give shareholders some idea of when it hopes to resume paying dividends. It has been reported in the press that chief executive Antonio Horta-Osorio is keen to pay a small dividend in early 2014.
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