Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

3 Things to Love About Lloyds Banking Group PLC (ADR) (LYG)

LONDON — There are things to love and loathe about most companies. Today, I’m going to tell you about three things to love about Lloyds Banking Group PLC (ADR) (NYSE:LYG).

I’ll also be asking whether these positive factors make the biggest of Britain’s bailed-out banks a good investment today.

Lloyds Banking Group PLC (ADR) (NYSE:LYG)Return to profitability
Lloyds Banking Group PLC (ADR) (NYSE:LYG) has made a bottom-line loss in each of the last three years, the loss for the latest year to December 2012 being 1.3 billion pounds. However, the group posted a profit for the first quarter of 2013, and at its recent AGM, chief executive Antonio Horta-Osorio told shareholders: “We expect us to return to profitability this year.”

The improving situation at the bank has seen the shares hit a two-year high of 63 pence during May, 125% up on where they were this time last year. As the break-even price on the taxpayer’s 39% stake in the company is 61 pence, Lloyds Banking Group PLC (ADR) (NYSE:LYG)’s directors are starting to talk about the prospect of the government selling its shares and the bank returning to full health as a regular PLC.

Extra capital sorted
There has been more good news for Lloyds Banking Group PLC (ADR) (NYSE:LYG)’s shareholders this month. Back in March, the Bank of England had said the banking sector needed to raise an additional 25 billion pounds of capital to guard against future losses on loans.

The extra capital needed by each bank hasn’t been disclosed, but Lloyds Banking Group PLC (ADR) (NYSE:LYG) said last week it expects to meet the requirements from cash generated within the business and more disposals of non-core assets, “without recourse to further equity issuance.”

Dividend moving closer
While the possibility of a dilutive rights issue for shareholders has receded, the prospect of Lloyds Banking Group PLC (ADR) (NYSE:LYG) resuming dividends has moved closer.

Horta-Osorio told the Sunday Telegraph earlier this year that as the bank’s legacy issues are overcome and profitability increases, “it is obvious that Lloyds will be a high dividend-paying stock in the future, as it has been in the past.” At the recent AGM, chairman Sir Win Bischoff told shareholders the bank would resume paying dividends “as soon as we are able.”

A good investment?
Few investors will have made such a large return in such a short period on a FTSE 100 stock as those brave souls who backed Lloyds when the shares were trading below 25 pence a year ago.

A government sale of the taxpayer’s stake in the bank would likely put a brake on share-price momentum in the short term, although much will depend on the appetite of institutions, and the timing and level of the restarted dividend.

I don’t expect to see a repeat of last year’s gains in the next 12 months. But in the longer term, Lloyds’ shares could still outperform the market from their current level.

The article 3 Things to Love About Lloyds Banking Group originally appeared on

G. A. Chester does not own any shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.