Business & Investment

Three reasons why Lloyds’ stock price could break the FTSE 100 in 2021

The· Lloyds (LSE: LLOY) Stock prices were one of the hardest hits FTSE 100 Excellent stock in 2020. The terrible performance of Lloyds’ stocks was not a big surprise, as banks are so well suited to the health of the wider economy. After all, Britain suffered the worst economic contraction over the centuries last year.

Is there any reason to be more optimistic this year? I think so. In fact, there are three reasons why Lloyd’s share price could break the FTSE 100 in 2021. First, let’s take a brief look at last year’s stock price performance in the context of indexes.

Comparison of Lloyds stock price and FTSE 100

Lloyds shares closed at 36.44p in 2020. This was a whopping 41.7% below the 62.5p level they started the year.

The FTSE 100 also suffered Annus horribilisBut not as bad as Lloyds. It started at 7,542.40 points in 2020 and ended on New Year’s Eve at 6,460.52 points, down 14.3%.

Lloyds may lead the FTSE 100 higher

The short-term outlook for Lloyds’ stock price is questionable. Because the short-term outlook for the economy is not good.Indeed, in an interview with BBC Andrew Marr yesterday, Boris Johnson said Covid’s restrictions “Probably tougher.” This is due to a new variant of the virus that is rapidly spreading.

However, Initial research The mutant suggests that it is not vaccine resistant and does not cause more serious illness. If so, we can expect economic activity and corporate confidence to increase by 2021 as mass vaccination is deployed.

Just as stocks in sectors that best fit the UK economy, like Lloyds, were hit hardest last year, the FTSE 100 could rise as economic activity begins to recover this year.

Return to the agenda and pay dividends

It wasn’t just the performance of Lloyd’s stock in 2020 that hurt investors. Dividends have been suspended at the request of the Prudential Regulation Authority (PRA). PRA is that “If your group does not agree to take such action, we are ready to consider using our supervisory authority.”

There is better news in 2021. The PRA announced last month that it would grant permits to banks. “If the board chooses to do so, please restart some distributions.” Before the pandemic, dividends were a big attraction for Lloyds investors. Resumption of payments should lead to increased demand for stocks among those seeking income.

Lloyds stock price and net asset value

Following the resumption of dividends after Lloyds’ financial crisis, stock prices reached a high of 89 pence in May 2015. This was 1.6 times the bank’s tangible net asset value (TNAV) of 55.8 pence per share.

Lloyds’ current share price of 36.44p is only 0.7 times the previously reported 52.2p of TNAV. In the short term, I don’t think the stock will be revalued 1.6 times that of TNAV. But as the economic recovery gains momentum, it shows the potential for a significant rise.

What am i waiting for

I think Lloyds’ stock price could break the FTSE 100 in 2021 for three reasons discussed. Nevertheless, the stock remains on my watchlist for now.

I have just taken office as a new chairman and a new CEO is approaching dividend With full-year financial results on February 24th, at what level we will be back with a policy on future payments. We also want to see new management strategies to move banks forward in the medium term.

GA Chester does not have a position in any of the shares mentioned. The Motley Fool UK recommends the Lloyds Banking Group. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by considering different insights, Better investors than us.

Three reasons why Lloyds’ stock price could break the FTSE 100 in 2021 Three reasons why Lloyds’ stock price could break the FTSE 100 in 2021

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