Category Archives: $LLOY

2CentView Themes – Financials

Less regulation and higher interest rates will take bank valuations higher – they have already had a good run, but will go higher if rates rise at faster pace than expected, so keep a long a position in your favourite stock and if possible overall higher weight (20%) in the sector. Also a good hedge against higher rates, which mean higher mortgage payments.

Px vs FV

$JPM 86 vs 80 Yield 2.2% [Dimon top CEO!]

$C 59.4 vs 64 Yield 1%

$MS 42.3 vs 44 Yield 1.9%

$GS 239.5 vs 228 Yield 1% [2 key Trump appointments are ex Goldman Sachs Bankers]

$BAC 22 vs 23 Yield 1.4%

The regional US Banks could also do well, and perhaps consolidate. Top Picks are:

$KEY 18 vs 18 Yield 2%

$FITB 27 vs 25 Yield 2%

If you are not involved recommend buying anyone of the these top US Banks, $MS and $C still lower than Fair value, 2 key appointments are ex-GS Bankers, Jamie Dimon is a great CEO and JPM is a top firm + either KEY Bank or Fifth Third.

—European Banks—

European Banks are still not great shape and the negative interest rates are causing problems – except for perhaps $HSBC, which has performed well this year as Gulliver simplifies the business model and sells assets.

Deutsche Bank has had a good run since hitting a low of EUR 10, but it is not total clear where it will go from here – a rights issue may be required, the fine of $7billion much lower than the $14billion, but still $2billion higher than provisioned – although around $2billion is deferred over 2 years.

Barclays also has the overhang of a law suit from the SEC over mortgage backed securities sales in 2008. The stock is trading at 60% to book value.

Px vs Fair values:
$DBK 17 vs 18

$BARC 221 vs 200 Yield 1.25%

$LLOY 55 vs 62.5 Yield 4.7%

$HSBC 660 vs 675 Yield 4.7%

2CentView has a core position in $MS and $HSBC and a trading position in Barclays opened at 211.

TSB IPO – 260p flotation price, 11% premium on first day ..great price for …

LLoyds – they were about to sell TSB to Co-op for 750million and now they got 1.3bn ! – Co-Op’s hole in the balance sheet netting LLoyds over 500 million more!!!

However, these kind of Government backed IPOs should be priced to attract retail investors to the stock market and a 11% premium does not really entice investors given the potential risk in buying a new issue.

2CentView was this should have been in the 220-250 range so investors can realise a nice 20-25% profit on day one!

2CentView plans to flip the allocation back at 300!

TSB IPO – 250-270 range indicated…at the medium to higher end…Flippers should..

If you are in the IPO, hopefully the price will be in the low to mid-point of the 250-270 range.

If you plan to flip this tomorrow, sell above 300-310 area – which is above book value.

Demand has been strong for this IPO – investors attracted by the clean balance sheet, and simple business model – i.e. deposits and Loans!

@WhereKitWan: TSB IPO Prospectus out here…. should you apply?

Prospectus available here:

2 important numbers in the prospectus: Net Assets=1.4bn and Profit=60m.
Pricing range = 220 to 290 (500k shares) valuing the company between 1.1bn and 1.4bn – so between 0.8 and 1x book value.

See headlines stating that the pricing values the company ‘below book value’ – but this does not necessarily mean it is cheap – Barclays is trading 0.8 times Net Tangible Book.
Not sure The Profit number is that useful, as you really need EPS forecasts in years further out to get an idea of the value of the company (2CentView model is based on this).

Note: The recent OneSavings IPO opened at 4% premium to IPO price, so not a windfall! And, There are more ‘challenger banks’ coming.

So the bottom line, 2CentView is that the deal should be priced in the 220-250 area, in order to have a chance of making profits on the first day of trading, but only expect a premium of 10-20% on the first day.

So no free champagne lunch like we got with Royal Mail!

@wherekitwan – definitely register interest with your broker on TSB Shares….

It is likely to be attractively priced as the Government still owns a large stake in LLoyds and the Government will be keen to ensure the deal goes well – The Royal Mail was ‘give away price’!

There are quite few retail banking IPO’s coming e.g. Metro Bank, and investors will be wary of this forthcoming supply.

If you can, look at the offering circular (which your broker should send you if are registered) and the future EPS forecast – the price range should be on a multiple of 8-10 times if priced attractively.

Comparable forward p/e

$LLOY = 10.6
$HSBC= 11

Hopefully will be some free money but NOT as cheap as $RMG (Royal Mail)

@WhereKitWan: @2centview what’s your thoughts on $LLOY planned share sale l8r this year? Was looking to buy some on dip but not so sure..

$lloy fv=75 area so trading at fair value. Government keen to sell more shares now price is well above their breakeven…just about to get on a plane to cal …thats calcutta not california..will send u more info when i am back in hyderabad on thursday.
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