LLOYD'S- Up-Down-or Sideways?
While I am still bullish on LYG for the longer term, I wanted to offer a "Head-Up" on their current situation.
They have stated that they believe that most of their "bad loans" have been addressed. With 80% of their first half losses attributed to HBOS and a careful review of their remaining loan portfolio, they are considering not participating in the APS (Asset Protection Scheme).
The main reason they don't want to participate is the premium cost of having over 400B (less the first 25B) insured by APS. This premium is about 25B.
They are currently about 40% ownd by the U.K. Govt, and if they were to issue additional shares to cover the cost of this premium, then the Govt. would become not only the largest shareholder, but the majority shareholder. Something they want to avoid.
They had made a commitment (I think it was back in March) that they would participate, but are now having second thoughts. They would probably like to "opt out" all together, but probably don't have that option. They are now in talks to try and reduce their participation because they don't believe they need it and because of the enormous cost involved.
Because of all the uncertainty at this time, their shares will likely undergo significant fluctuation in the intermediate term. So if you are in for the short term and have made a profit, you might want to consider getting out, at least for awhile until the picture gets clearer.
If you are a longer term investor, and don't mind "gyrations" in the price while you wait, then I would suggest you just stay put, or even use this as an opportunity to increase your holdings.
I strongly believe that over time, they will clean up the HBOS mess and return to their old conservative, profitable ways.
While Daniels seems to have the confidence of the board and the Govt at this time, he could be gone in the longer run. While I would like to see him stay (he did not make the decision to takeover HBOS), I don't believe his departure will have a negative effect in the long run.
I am holding and will look for opportunities to add to my position, but you make your own decision.
JMO and worth exactly what I am charging for it.