Lloyds (LSE: LLOY) has endured a difficult 2016, with the banks share price falling by 13% year-to-date. However, it could have been much worse. Investor sentiment in the part-nationalised bank has strengthened after the initial shock of the EU referendum result. And the performance of the UK economy has held up better than forecast in the second half of the year. Despite this, Lloyds has lagged the FTSE 100 by 25% this year. But looking ahead to next year, I feel that the tables could turn.
The bank faces problems mexicanpharmacy-onlinerx associated with Brexit. While the UK economy has held up well thus far, heightened uncertainty could become a key theme of the next year. This could lead to downgrades on GDP forecasts and cause profitability at UK-focused banks to come under pressure.
However, Lloyds seems to be well-placed to deal with such Brexit-induced woes. For example, it has spent recent years becoming increasingly efficient and has made numerous job cuts, efficiencies and asset disposals. Theyve positioned the company as a relatively efficient bank among what remains a troubled sector. As such, it may be hit less hard than rivals and investor sentiment may therefore be higher than expected.
The sildenafil muscular dystrophy banks valuation indicates that the market has already priced-in future difficulties. It trades on a forward price-to-earnings (P/E) ratio of just 9.5, which shows that theres scope for a significantly higher rating. In fact, even a 50% rise in the banks share price would equate to a P/E ratio of just 14.3. With the FTSE 100 being close to its all-time high, it lacks value appeal compared to Lloyds.
Its not just on the valuation front that Lloyds impresses. With inflation forecast to rise to nearly 3% next year, higher yields and growing dividends could become increasingly invogue. Thats because investors may become concerned at the effect of higher inflation on their incomes, with weaker sterling likely to be a key feature of 2017.
With a yield of 4.9%, Lloyds is a very strong income stock. Its due to raise dividends by almost 18% in 2017, which puts it on a forward yield of 5.8%. Despite such a large rise in dividends, the bank is still expected to cover its shareholder payouts around 1.8 times cialis bph europe next year. This indicates that theres scope for further rises in future years without jeopardising the companys growth potential or financial standing.
While 2016 has been a disappointing year for the bank, its prospects for 2017 are very bright. Brexit may cause volatility in its share price, but its improvements as a business in recent years have positioned it well to withstand the difficulties thatmay present themselves.
The market already seems to have priced-in a difficult outlook, while the income cialis 10 mg experience potential on offer over the medium term could create heightened demand for the banks shares next year. Therefore, I believe that FTSE 100-beating prospects may be just around the corner.
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