Lloyds Banking Group shares – are they safe?
Published: 17 February 2009 By MoneyhighStreet Staff Leave a Comment
Lloyds Banking Group (LLOY.L) shares continue to fall and many analysts believe there is a risk it could need more state funds or be nationalised. So are Lloyds Banking Group shares safe?
Firstly Lloyds maintains it has a healthy balance sheet that more than meets the Financial Services Authority (FSA) requirements on capital.
Group Chief Executive, Eric Daniels, has recently said that whilst the short term outlook is challenging the Group has excellent long term earnings potential and is making good progress on integrating the HBOS and Lloyd’s Bank businesses.
However, Lloyds has lost its coveted Aaa rating from Moody’s. The cut being to Aa3, the same as Royal Bank of Scotland and Barclays.
The ratings agency said ‘The downgrades reflect the high level of troubles and higher-risk exposures within HBOS, which Moody’s considers will weaken the profitability and capital adequacy of the overall group.’
Also Citigroup lowered its rating on Lloyds Banking Group to ‘hold’ from ‘Buy’, following the announcement that HBOS made a loss due to the greater than expected rise in bad loans.
Government officials are keen to state that the governement is not contemplating injecting more capital into Lloyds at the moment, albeit also stating that it will do what it takes to maintain market stability.
Lloyds Banking Group is already 43% owned by the government.
If the Bank is taken into state ownership, in other words that it is fully nationalised, then shareholders will be left with nothing.
In this scenario, if you are one of the 3 million plus private investors in Lloyds Banking Group, the next question you ask might be ‘should I sell my Lloyds Banking Group shares now?’.
This is one you need to answer for yourself, taking into account your own particular circumstances and perhaps referring to your own financial adviser.
That said some advisers are seeing clients who are happy to take a risk holding their shares for the moment in the hope that Lloyds will return to a major force in the longer term.
