ShoreCap keeps 'hold' on Lloyds after mixed 2014 results

Shares in banking group Lloyds edged higher on Friday after shareholders celebrated their first dividend payment in six years, though weaker-than-expected results prompted Shore Capital to retain a ‘hold’ rating on the stock.

“The main news is that the company has finally resumed dividend payments to ordinary shareholders, although it is slightly more disappointing to note that earnings on both an adjusted and statutory have fallen short of our own and market consensus expectations,” said analyst Gary Greenwood.

Adjusted profit before tax (PBT) rose to £7.76bn in 2014, up 26% on the year but below the ShoreCap estimate of £7.93bn and the consensus forecast of £7.82bn.

The broker said that the ‘miss’ owed to a worse-than-anticipated income performance, partly offset by better-than-expected impairments.

Statutory PBT increased more than four-fold to £1.76bn, below ShoreCap’s and consensus forecasts of £2.94bn and £2.62bn respectively.

Meanwhile, the final dividend payment of 0.75p per share also came in shy of the 1.5p and 1p ShoreCap and consensus had estimated, respectively.

On a positive note, tangible net asset value (TNAV) per share and capital buffers came in ahead of expectations, while guidance on the net interest margin increasing to 2.55% this year was better than hoped.

All in all, Greenwood doesn’t expect a material change to its profit forecasts for this year, and has currently pencilled in an adjusted PBT of £8.02bn.

He said: “Based on last night’s closing price of 78.5p, the shares are trading on a 43% premium to their end of December 2014 TNAV of 54.9p, with a prospective 2015 price-to-earnings ratio of 9.5x and dividend yield of 4.5% based on our current estimates. We see fair value around 80p (2% upside) and hence stick with our neutral stance.”

The stock was up 0.6% at 78.97p by 10:56.