Lloyds Cuts Jobs Despite "Brexit Optimism"

Analysts think Lloyds is better positioned than most peers to handle Brexit fallout and are maintaining the fair value despite job cuts and plans to sell off property assets

Stephen Ellis 28 July, 2016 | 4:28PM
Facebook Twitter LinkedIn

Lloyds reported a solid second quarter and we plan to maintain our 77p fair value estimates and narrow moat rating. Results were good, with an underlying profit of £4.2 billion, down 5% from last year’s levels due to the elimination of TSB, lower insurance income, pressure on fees and commissions, and reduced income from the run-off portfolio. Still, an underlying return on equity of 14% and a 13% increase in the dividend are positive.

We do think Lloyds is better positioned than most peers to handle Brexit given its simple, lower risk business model focused on retail and commercial lending, and it has also done much of the heavy lifting already in terms of simplifying its business in the past several years.

Job Cuts Despite Brexit Optimism

The bank remains optimistic in the face of Brexit, indicating that the U.K. enters Brexit from a position of economic strength. However, the bank’s plans to deepen its cost cuts indicate that it is clearly worried about the negative impacts of Brexit, concerns that we share. The bank now plans to close an additional 200 branches, reduce head count by another 3,000 employees, and has boosted its cost-savings target to £1.4 billion versus £1 billion by the end of 2017.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Lloyds Banking Group PLC46.68 GBP0.00Rating

About Author

Stephen Ellis  Stephen Ellis is a senior stock analyst on the Energy Team.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement