Investors feared a sharp drop-off in revenue growth at Lloyds as Brexit created economic Armageddon. But, aside from sterling’s collapse to its cheapest since 1848 versus a basket of major currencies in October, plenty of other gauges have remained broadly stable.

PMI surveys for the services, manufacturing and construction sectors haven’t signalled the sharp cooldown that many had predicted. Home price growth remains solid-if-unspectacular and high street sales continue to chug higher. Indeed, the British Retail Consortium announced yesterday that retail sales rose 2.4% in October, trashing the three-month average of 1.1% and representing the best monthly result since January.

Growth concerns

However, the full impact of Britain’s self-imposed exile from the European Union was never going to manifest itself in near-term datasets. Rather, the implications of this summer’s referendum is likely to play out in economic releases from 2017 onwards.

Indeed, economists have been busy taking the hatchet to their GDP growth forecasts for the UK in recent weeks, citing a range of factors from falling business investment through to the impact of runaway inflation on consumer spending patterns.

The boffins at the European Commission (EC) are the latest band to downgrade projections for next year, and economic expansion of 1% is now expected. This is a sharp reduction from the 1.8% rise predicted in May. And growth will remain subdued in 2018 at 1.2%, the EC said this week.

But aside from Brexit-related issues, the country also faces a string of other issues that could dent growth, from slowing global trade flows to the changing political landscape in Europe and the US.

And adding to the revenues woes of Lloyds and the rest of the UK-focused banking segment, the Bank of England is also likely to keep interest rates hovering around record lows to prevent the economy from flatlining, putting a further strain on profitability.

Cheap but cheerless

Given this backdrop, it should come as no surprise that the City expects Lloyds to endure an 8% earnings dip in 2017 alone.

So while the bank deals on a P/E rating of 8.8 times, this is in my opinion a fair reflection of the colossal task Lloyds will have to generate meaningful earnings growth rather than an attractive buying opportunity.

And those hoping for gigantic dividends may also end up disappointed. A 3.7p per share payout is currently forecast for next year, yielding a market-trumping 6.4%. But a likely continuation of PPI-related charges through to the end of the decade; a muggy earnings outlook; and Bank of England advice not to raise dividends after July’s liquidity injections could also see these figures miss the mark.

I believe there’s plenty of mud in the system that should discourage investors from buying Lloyds right now. The answer to the question in the headline therefore is “not yet”. As to when it will be safe, that’s down to Lloyds to find a way to kick-start earnings growth.

The post When will it be safe to buy Lloyds Banking Group plc again? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The business was lifted by an incredible uptick in iron ore values in October — Rio Tinto sources 60% of total earnings from this one market. The steelmaking ingredient hit its highest since April towards the end of the month and has continued to climb as we enter November, iron ore recently trading around $65 per tonne.

However, the scale of iron ore’s stunning rise in 2016 has led many to question that speculative buying rather than robust, fundamental trading is at play.

Sure, factory data from China has been more encouraging, the Caixin PMI manufacturing gauge leaping to 51.2 in October, the highest level since summer 2014. But export data from the country signals that underlying global demand for China’s goods could be taking a turn for the worse — outbound shipments sank by an alarming 10% in September in dollar terms.

It’s difficult to rule out further near-term share price rises at Rio Tinto given that iron ore values continue to stride skywards.

But with major suppliers embarking on ambitious supply expansion plans, and demand indicators far from reassuring, I believe Rio Tinto remains a scary pick for long-term investors.

Switch out

The earnings prospects of Barclays (LSE: BARC) could also be described as rather sticky, in my opinion, despite last month’s splendid 13% share price ascent.

Indeed, the FTSE 100 bank’s latest set of quarterlies that were released last month underlined the variety of problems facing it in the near term and beyond.

Barclays was forced to stash away an extra £600m during July-September for the ongoing PPI-mis-selling scandal. The London-based business has now set aside an astonishing £8.4bn to cover claims, the latest provision reflecting the FCA’s decision to extend a proposed submission deadline to 2019.

But this isn’t Barclays’ only problem, the company facing the possibility of a sharp deceleration in the British economy as it adjusts to June’s EU referendum. Added to the prospect of a sharp rise in bad loans, falling consumer spending power and cooling business activity, Barclays is likely to also face the Bank of England keeping interest rates locked around record lows to stop the economy from flatlining.

The shedding of non-core assets like Barclays Africa Group provides the financial colossus with less insulation from the troubles facing its home markets. And Barclays’ profitability could also take a hefty whack should EU passporting obstacles happen during the government’s Brexit negotiations.

The vast array of problems facing Barclays makes it an unsuitable pick for cautious investors, in my opinion, a situation that could lead to a heavy share price reversal in the months ahead.

The post These FTSE 100 stocks surged in October. Can they keep charging? appeared first on The Twelfth Magpie.

More reading

• Up 50% in a year! That’s not the only reason I’d consider buying Barclays over Nvidia stock today
• Barclays shares could soon soar another 21%, according to the latest price target
• After a 160% rally, major brokers still see more gains for Barclays shares. Here’s why
• How many Barclays shares do I need to buy to get a £1,000 passive income?
• Here’s the very latest Barclays share price target upgrade

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The ‘Black Horse’ bank has shed a quarter of its value since British voters decided to leave the European Union in June, and with good reason — quite how Lloyds will generate revenues growth in the years ahead, as severe economic cooling appears on the cards from 2017, and with it a backcloth of ultra-low interest rates, remains the subject of much head-scratching.

Economy slumping?

The Bank of England’s latest ‘Credit Conditions Review’ this month certainly gave cause for stakeholders in Britain’s banks to be concerned.

The report noted that

“secured credit demand for house purchase fell significantly in the three months to mid-September“

adding that

“major UK lenders reported that the fall in demand was likely to have been driven by temporary factors that led borrowers to defer mortgage applications, particularly the outcome of the UK referendum on membership of the EU.”

As the UK’s largest residential mortgage lender, a prolonged deterioration in homebuyer appetite could take a large chunk out of Lloyds’ top line. Indeed, a separate report from the Bank of England last month showed the number of mortgage approvals sinking to 21-month lows in August.

But this is not the banking sector’s only worry. Indeed, the Bank of England also warned that “demand for credit from businesses weakened across all business sizes in quarter three.”

As well as the pressures created by Britain’s muddled EU withdrawal, the likes of Lloyds are also being battered by the rise of ‘challenger’ banks stepping up to lend to business. Just last week Redwood Bank was the latest in a string of new institutions to apply for a UK banking licence.

PPI problems

On top of fears that Lloyds’ statement may reveal a sharp economic deceleration, investors are also sweating over another huge hike in what the firm set aside to cover the long-running PPI mis-selling scandal.

Indeed, the boffins at UBS have factored in an £800m charge for the July–September period, while recent media reports also suggest an oncoming storm for Britain’s banks. Just last week Sky News reported that executives at Lloyds, RBS, Barclays and HSBC are bracing themselves for a collective £2bn hit for the third quarter.

Lloyds has been by far the worst culprit on the PPI front, and so far set aside £16bn to cover the cost of the scandal. And the FCA’s decision to put back a proposed claims deadline to mid-2019 is likely to keep the colossal bill ticking higher for some time yet.

While many would argue that the economic and legacy risks facing Lloyds are currently factored into the share price — the financial giant currently deals on a P/E ratio of just 7.6 times — I would expect the sellers to come out in force again should third-quarter numbers be worse than even the most sombre of forecasts.

The post Should you ditch Lloyds Banking Group plc before next week’s results? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Is British best?

Fears over the health of the UK economy continue to subdue investor appetite for Lloyds.

Massive asset shedding makes the bank dependent on the financial health of its home market — and more specifically the British high street — so signs of cooling domestic economic growth is doing little to help investor appetite. And of course the run-up to June’s ‘Brexit’ referendum is casting a further pall over Lloyds’ revenues outlook.

On top of this, Lloyds’ decision to concentrate on its UK retail operations leaves little room for the firm to generate explosive earnings growth in the long term, unlike many of its competitors like HSBC and Santander, which boast significant emerging market exposure, for example.

Simply wonderful

However, the sterling achievements of Lloyds Simplification cost-cutting progress in boosting the bottom line certainly merits attention.

Lloyds saw operating costs drop 2% during January-March, to just under £2bn. This prompted the bank to note that

“Phase II of the Simplification programme has now delivered £495m of annual run-rate savings to date, ahead of plan and on track to deliver £1bn of Simplification savings by the end of 2017.“

The company’s cost-cutting plan clearly has plenty left in the tank.

PPI pains

A major problem that continues to dog the entire banking sector is the likely scale of further penalties for the mis-selling of payment protection insurance (PPI).

In a rare ray of sunshine, Lloyds was not required to set aside further capital to cover the cost of the scandal during January-March, the bank advising that “complaint levels over the three months have been around 8,500 per week on average, broadly in line with expectations.”

That is not to say that additional provisions will not be made in future, of course. Lloyds has already stashed away £16bn for previous misconduct, and many commentators expect this bill to continue rising.

Indeed, Standard and Poor’s estimated last month that Lloyds, HSBC, Barclays and RBS will have to pay out an extra £19.5bn collectively in 2016 and 2017, taking total compensation for conduct and litigation issues since 2011 to £55.8bn.

Going for a song

Still, it could be argued that the risks facing Lloyds are currently factored into the share price.

Sure, the bank may be expected to swallow an 11% earnings decline in 2016. But this results in a P/E rating of just 8.8 times, well below the bargain benchmark of 10 times. And this reading falls to 8.7 times for next year, thanks to a predicted 2% earnings rise.

And of course dividends are expected to get flowing at Lloyds from this year onwards. A projected 4.4p per share payout for this year creates a market-smashing 6.6% yield. And expectations of a 5.2p reward in 2017 drives the yield to an astonishing 7.7%.

The post Why you should — and shouldn’t — buy Lloyds Banking Group plc appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But are investors throwing fresh money away by ploughing back into the bank?

Growth concerns

Barclays’ decision to cut the dividend to 3p per share through to the close of 2017 — a huge reduction  from last year’s 6.5p reward — underlined the balance sheet struggles brought about by hulking regulatory fines.

The business was forced to stash away a further £2.2bn in 2015 to cover the cost of mis-selling PPI alone, up from £1.27bn in the prior year. And more than half of last year’s costs were accrued during the fourth quarter alone, illustrating that Barclays expects a deluge of claims before a possible 2018 deadline kicks in.

Looking elsewhere, many industry commentators have voiced concerns over Barclays’ decision to sell its holdings in Barclays Africa Group, a move that seriously undermines the firm’s exposure to lucrative emerging markets.

But in the nearer-term Barclays’ fears fall a little closer to home. The possibility that Britain could tumble out of the European Union in June is casting a huge pall over the bank’s revenues outlook, as are signs that the UK economic recovery is running out of steam — the IMF yesterday cut its growth forecast for 2016 to 1.9%, down from January’s estimate of 2.2%.

Leaner and meaner?

Still, I reckon there is plenty for investors to get excited about. In the long-term I am confident that the stable British economy should deliver great returns at Barclays, while the firm’s vast exposure to North America provides the bank with exceptional opportunities on foreign shores.

While plans to kick-start Barclays’ Investment Bank have divided shareholders, the division undoubtedly provides the potential for spectacular earnings growth in the years ahead. Meanwhile, planned office closures across Asia suggests that chief executive Jes Staley is keen to keep a tighter leash on costs at the Investment Bank than was exhibited in previous years.

Speaking of which, Barclays’ extensive ‘Transform’ cost-cutting programme has worked wonders in terms of creating a much leaner, profits-generating machine. The company’s cost:income ratio slipped to 69% last year, and Barclays plans to drive this below 60% further down the line.

What’s the verdict?

So while Barclays may still have plenty of questions to answer, I remain confident the firm has what it takes to navigate these travails and provide resplendent investor returns in the coming years.

This view is shared by the City’s army of brokers, who expect Barclays to bounce from an anticipated 4% earnings slide in 2016 to record a 41% advance next year. Consequently Barclays’ ultra-cheap P/E rating of 10.4 times for the current period slips to a lip-smacking 7.4 times for 2017.

And while Barclays’ 1.8% dividend yield for this year may lag the FTSE 100’s average yield of 3.5% by some distance, I fully expect payouts to march higher beyond 2017 as capital-building concludes and earnings explode.

The post Are The Bulls Or The Bears Right About Barclays PLC? appeared first on The Twelfth Magpie.

More reading

• Up 50% in a year! That’s not the only reason I’d consider buying Barclays over Nvidia stock today
• Barclays shares could soon soar another 21%, according to the latest price target
• After a 160% rally, major brokers still see more gains for Barclays shares. Here’s why
• How many Barclays shares do I need to buy to get a £1,000 passive income?
• Here’s the very latest Barclays share price target upgrade

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In particular, all three banks continue to stash away huge sums to cover the cost of previous PPI-related misconduct. Lloyds — by far the industry’s worst culprit — was forced to set aside a further £2.1bn between October and December, taking total provisions to date to a colossal £16bn.

And this problem isn’t anticipated to go away any time soon. Laurie Mayers, associate managing director at Moody’s, noted this week that “conduct litigation charges for the UK’s five largest banks increased significantly in 2015 by approximately 40%, to £15bn.”  

Mayers added that “this significant increase in 2015, despite some decline in 2013 and 2014, demonstrates that these charges continue to present considerable tail risk.” Indeed, Moody’s expects claims to accelerate ahead of a possible 2018 deadline.

It’s a penalty!

However, these are not the only fears shaking investor confidence in the banking sector.

Barclays was forced to take the hatchet to its dividend policy this month in response to its various legal battles — the bank’s conduct in Asia, the US and South Africa are also under the microscope for a number of reasons.

And HSBC was forced to shell out $470m last month related to dodgy mortgage sales in the US. The bank still faces a litany of other cases, perhaps most infamously claims that its Swiss unit encouraged tax evasion.

Meanwhile, concerns over the banks’ exposure to battered commodity markets was underlined by new, huge impairments over at HSBC. The bank’s Commercial Banking division was forced to swallow an $800m provision in October-December thanks to sinking oil and gas prices, up more than 300% from the prior quarter.

On top of this, signs of worsening economic conditions across HSBC’s critical Asian marketplaces is also prompting investors to sit on their hands.

Back at Barclays, questions remain over the bank’s direction under the stewardship of new CEO Jes Staley. The company has recently put its African banking division on the block; is slowly revving its Investment Bank back into action; and is splitting itself into two new divisions (Barclays UK and Barclays Corporate and International).

Lloyds takes it

Still, it could be argued that the risks facing the banks are more than baked-in at current share prices. Barclays and HSBC carry prospective P/E ratings of 9.9 times and 10.1 times, respectively, either side of the bargain-basement watermark of 10 times.

But while I believe both firms remain strong long-term picks, as global banking demand surges and massive cost-cutting exercises kick in, I believe Lloyds is the better banking pick at the present time.

Sure, the company’s focus on the British High Street doesn’t provide it with the prospect of hot earnings growth like HSBC and Barclays. But Lloyds’ lower risk profile makes it less susceptible to near-term earnings volatility.

And like Barclays and HSBC, Lloyds deals on a mega-low P/E figure, at just 9.1 times for 2016. And the bank’s 13% CET1 capital ratio also tops those of its rivals, putting its projected 4.3p per share dividend — yielding a stonking 6.1% — on safer ground than its peers.

The post Bank Wars: Should You Buy Barclays PLC, HSBC Holdings plc Or Lloyds Banking Group PLC? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Up 250%! Here’s why I bought HSBC shares over SpaceX stock
• Up 50% in a year! That’s not the only reason I’d consider buying Barclays over Nvidia stock today
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays shares could soon soar another 21%, according to the latest price target

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Misconduct mayhem

A persistent problem for Barclays in recent years has been the scale of financial penalties imposed on it, for a wide range of misdeeds.

The bank has been forced to shell out a fortune in fines related to the fixing of currency and Libor markets, for example, and more recently swallowed a $70m fine related to dodgy operations across its ‘dark pool’ trading platform.

But the saga is far from over, with Barclays warning this month that its operations across the US, Asia and South Africa are under investigation for a litany of further issues.

Of course the PPI problem, in particular, is a major drain on Barclays, the bank having stashed away a further £1.45bn during the fourth quarter alone to cover claims. And I expect total provisions so far of £7.4bn to keep rising as the FCA’s proposed claims deadline in 2018 comes into view.

Dividend disappoints

The impact of these colossal costs has forced Barclays to slash the dividend through to the close of 2017. The bank expects to pay 3p per share to shareholders during this period, down from 6.5p in each of the past four years.

Consequently Barclays boasts a yield of just 1.8%, falling well short of many of its rivals — Lloyds and HSBC offer yields of 5.9% and 7.9% respectively, for example.

Restructuring rattles

News of fresh restructuring has also rattled investor nerves recently, the bank announcing that it would be cut in two between Barclays UK and Barclays Corporate and International.

Although required under ‘ringfencing’ rules, the move naturally raises fears of further colossal costs, not to mention other transitory problems as the changes kick in.

On top of this, many investors are concerned by Barclays’s decision to drastically reduce its operations across lucrative emerging markets. The bank is preparing to hive-off its stake in Barclays Africa Group, giving truth to the rumours of recent months, and follows news that Barclays is pulling its Investment Bank out of several territories in Asia.

So is Barclays a ‘buy’?

But while these issues all merit serious attention, I believe there are still plenty of reasons to get excited about Barclays.

The company’s ongoing bid to slash costs saw operating expenses fall 6% last year, to just under £17bn, and costs should continue to fall thanks to improving digitalisation across the business and the steady stream of branch closures.

Meanwhile, Barclays’ renewed focus on the relatively-stable UK and US economies will come as huge relief for risk-averse investors. And while a reduction in its developing market footprint undermines the firm’s long-term earnings potential to some extent, a seemingly-sensible approach to revamping its Investment Bank could still deliver stunning returns in the years ahead.

The City expects the business to report an 11% earnings advance in 2016 alone, producing an ultra-low P/E rating of 8.7 times. To me, this suggests that the risks facing Barclays are currently baked into the price, leaving plenty of upside for long-term investors to enjoy.

The post Buyer Beware! What You Need To Know Before Buying Barclays PLC appeared first on The Twelfth Magpie.

More reading

• Up 50% in a year! That’s not the only reason I’d consider buying Barclays over Nvidia stock today
• Barclays shares could soon soar another 21%, according to the latest price target
• After a 160% rally, major brokers still see more gains for Barclays shares. Here’s why
• How many Barclays shares do I need to buy to get a £1,000 passive income?
• Here’s the very latest Barclays share price target upgrade

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

PPI pains

Make no mistake: the problem of crushing PPI-related penalties is likely to remain a millstone around Lloyds’ neck for some time yet.

The bank has so far stashed away an eye-watering £16bn to cover the cost of its previous mis-selling practices, including an extra £2.1bn provision for the fourth quarter of 2015. The latest charge topped the City’s worst estimates by some distance, including that of Barclays Capital, which earmarked a provision of between £800m and £2bn.

And the amount Lloyds will have to set aside is expected to accelerate ahead of the possible 2018 claims deadline floated by the Financial Conduct Authority.

‘Brexit’ fears loom large

Another huge shadow hanging over Lloyds is the prospect of the UK tumbling out of the European Union when the country goes to the polls in June.

Lloyds’ chairman Lord Blackwell has tentatively suggested support for Britain going it alone, but numerous blue-chip companies — including fellow banking giant HSBC — have lined up in recent weeks to voice their concerns over the economic impact of a departure.

Opinion remains divided over the potential fallout of ‘Brexit’, but a step into the unknown could have a devastating impact on Lloyds’ future profitability given its UK-focused footprint.

Poor growth prospects

But irrespective of the result of the European referendum, Lloyds isn’t expected to punch spectacular earnings growth in the years ahead.

While massive asset shedding has worked wonders in reducing the bank’s risk profile, not to mention slashing costs across the business, Lloyds’ subsequent reliance on the British retail segment is likely to significantly hamper the firm’s ability to generate bumper profits in the years ahead.

The City expects Lloyds to endure an 11% earnings slide in 2016, while a meagre 2% uptick is expected next year.

So is Lloyds a ‘buy’?

But while Lloyds’ bottom-line isn’t expected to take off any time soon, I believe the bank still offers terrific bang for your buck at current prices. Indeed, P/E multiples of 9.4 times and 9.1 times for 2016 and 2017, respectively, fall comfortably within ‘bargain basement’ territory of 10 times or below.

And for dividend seekers Lloyds could prove to be a particularly satisfying buy. The bank set aside £2bn for its shareholders last year, and with its CET1 ratio standing at a healthy 13% as of December, I believe the foundations are in place for payments to keep on expanding.

The number crunchers expect Lloyds to lift the dividend from 2.25p per share in 2015 to 3.9p this year, and again to 4.7p in 2017. Consequently Lloyds boasts huge yields of 5.4% and 6.5% for these years.

So while the costs of the PPI mis-selling scandal and the implications of a possible ‘Brexit’ loom large, I believe Lloyds remains a hugely-attractive banking pick at present prices.

The post What Investors Need To Know Before Buying Lloyds Banking Group PLC appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Metals play gets mashed

It comes as little surprise that platinum group metal (or PGM) producer Lonmin (LSE: LMI) suffered another heavy headache last week as commodity prices extended their downtrend. The business saw its share value haemorrhage an extra 27% between last Monday and Friday, and I see no immediate levers that could bring Lonmin’s eye-watering collapse to a halt.

Fresh fears over the state of the Chinese economy recently forced palladium below the critical $500 per ounce marker for the first time for five-and-a-half years last week, at around $486 per ounce. And sister metal platinum remains a whisker away from hitting levels not seen since December 2008 — it was last dealing at $860 per ounce.

As well as battling the prospect of further revenues weakness, Lonmin also has to deal with worsening currency movements — the South African rand sank to fresh record lows versus the US dollar just today — as well as the problem of escalating operating costs.

While Lonmin’s decision to raise cash via a $400m placing in November buys the company some much-needed time, until metal prices begin to charge higher again I believe the digger remains a risk too far at the present time.

A brilliant banking pick

Banking colossus Lloyds (LSE: LLOY) was also one of the notable casualties of last week’s sell-off across the FTSE, although the business shed a more modest 6% between last Monday and Friday. The stock is no stranger to severe price weakness, however, with Lloyds shedding more than a fifth of its share value since 2015’s highs of 89p back in May.

I have long considered Lloyds to be a terrific selection for bargain hunters, however, and last week’s collapse to two-and-a-half-year lows represents a fresh buying opportunity in my opinion.

Concerns over hulking PPI-related bills are likely to remain a concern at Lloyds for some time to come — the bank has proved the biggest culprit in when it comes to mis-selling products to the public, and was forced to stash a further £500m away in provisions between July and September, taking the total to a whopping £13.9bn.

But I believe there are plenty of other reasons to excite investors, with the steadily-improving UK economy helping to power revenue growth at its High Street operations. Meanwhile, the roaring success of Lloyds’ Simplification cost-cutting exercise, not to mention its continuing asset-shedding programme, is also helping to undergird earnings growth.

Although Lloyds is expected to suffer an 8% earnings slide in 2016, the bank still changes hands on an ultra-low P/E rating of 9.6 times. Any reading around or below 10 times is widely considered too good to pass up.

And with the business expected to raise a projected 2.4p-per-share dividend for 2015 to 3.7p in the current period — a figure that creates a market-busting 5.1% yield — I believe Lloyds is one of the of the most attractive banking stocks on the market.

The post Should Bargain Hunters Buy Last Week’s Losers Lloyds Banking Group PLC & Lonmin Plc? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Clearly, today’s news is not a given: the FCA has stated that it will consult on the issue by the end of the year. And, while a 2018 deadline would be welcome, it could cause the number of complaints to rise somewhat as people either submit their grievance or else leave it be.

For the banking sector, though, it is a step in the right direction and it is likely that if a cut-off point were introduced, investor sentiment would pickup in anticipation of its introduction. That’s because setting aside provisions for PPI claims in recent years has severely hurt the profitability of all of the major UK banks and, with there being no end in sight, many investors have been put off investing in the sector for fear that profits will always be held back by large payouts.

Of course, having a deadline for PPI complaints may not be such a bad thing for consumers, either. With the FCA stating in today’s release that 74% of consumers have heard of PPI and 77% say they are aware of problems or issues with it, it seems unlikely that many consumers who have genuine claims will miss out on receiving redress.

And, with the FCA mulling over initiating a communications campaign to inform consumers of the potential to claim, it could be the case that in the next couple of years there is an increase in the number of claims. Moreover, the FCA believes that such a campaign could also encourage consumers to claim directly to the firm involved, rather than using claims management companies which take hefty commissions.

However, the real winners from a deadline would undoubtedly be shareholders in UK banks. Even if there is a rise in complaints prior to a potential 2018 deadline, the confidence which banks have to pay out profit as a dividend will undoubtedly increase and this should mean that payout ratios rise at a brisk pace. And, with the payout ratios of the likes of Lloyds, Barclays and RBS being well below the index average, their yields could rise significantly and cause investor sentiment to improve dramatically in the coming years.

Clearly, the end of major fines for banks is not yet over. Various allegations of foreign exchange rigging and money laundering are still holding back investor sentiment in the sector. However, PPI has thus far cost the banking industry over £20bn which otherwise could have been reinvested for further growth or paid out as dividends. If this were to come to an end within the next three years, buying banks now could be an even shrewder move than it already is.

The post Hallelujah! This Could Be The End Of PPI Claims! appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens owns shares of Barclays, Lloyds Banking Group, and Royal Bank of Scotland Group. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.