The Lloyds share price has been trading in a tight range in 2023, with the price trending backwards and forwards between 45p-55p.
The FTSE 100 banking giant reported solid results for 2022 as rising borrowing costs helped increase Lloyds net interest margin – a key measure of profitability.
Trade in Lloyds shares has been subdued since the release as investors assess the implications of earnings guidance for the year ahead, which suggests 2023 may not provide as much growth as 2022. Lloyds reaffirmed their guidance in Q1’s interim management statement.
Lloyds weighed the trajectory for interest rates and guided banking net interest margin (NIM) to be greater than 305 basis points in the 2023FY. This could be lower than the 3.22% NIM recorded in Q1.
It was a similar story for other FTSE 100 banks. However, those banks with significant markets and investment banking divisions and exposure to Asia were slightly more confident in growth throughout the remainder of 2023. This may make Lloyds shares less attractive, given their focus on the UK and exposure to the housing market.
This is demonstrated in the year-to-date performance of the FTSE 100’s banks.
| FTSE 100 Bank | 2023 Performance |
| Lloyds | +0.2% |
| Natwest | -1.56% |
| Barclays | +0.2% |
| HSBC | +19.3% |
| Standard Chartered | +8.2% |
Concerns about the UK housing market are likely behind Lloyds shares currently trading near the lowest levels of 2023.
An overview of key ratios and income characteristics provides the opportunity to further assess Lloyds shares’ attractiveness compared to peers.
| FTSE 100 Bank | Price-to-Earnings | Price-to-Book | Dividend Yield | Dividend Cover |
| Lloyds | 6.0 | 0.6 | 5.3% | 3.3 |
| Natwest | 5.7 | 0.7 | 5.3% | 2.9 |
| Barclays | 4.7 | 0.4 | 4.6% | 5.3 |
| HSBC | 6.8 | 0.8 | 4.3% | 3.6 |
| Standard Chartered | 6.6 | 0.5 | 2.1% | 5.5 |
The constituents of the FTSE 100 banking sector trade broadly in line with the peer average providing little opportunity for significant rerates towards the mean in any individual stock.
FTSE 100 banks have long trades at a discount to book value, and if this should discount move to a premium, the sector is likely to move in unison. This doesn’t provide an opportunity to pick one bank over another.
Income seekers may lean towards Lloyds due to their higher yield of 5.3%, which is gently increasing.
Whether Lloyds is the best FTSE 100 bank to buy depends on individual investment objectives and the required balance of growth and income. Lloyds offers the best yield of FTSE 100 banks but the immediate growth outlook is cloudy.
Long-term investors may see the current 45.5p Lloyds share price as an entry to achieve the 5.3% yield. However, further deterioration in the UK housing market and lower interest rates later this year may provide a better entry price.