Laith Khalaf, senior analyst at Hargreaves Lansdown, says Yes.
It’s not a great time to be a bank, but the sector is in much better shape than it was going into the financial crisis. In particular Lloyds has simplified its structure to focus on key strengths in the UK retail and commercial banking market. There may well be challenges to come, and Brexit has already knocked 0.4 per cent off the capital generation expected by the bank this year, which could ultimately result in a hit to the end of year special dividend. Likewise falling interest rates don’t make for good business for banks in the long term. However, low interest rates do mean low loan impairment charges. It also looks like the money-zapping bulldozer of PPI claims are finally in the rear-view window. Capital buffers are much higher than they used to be, and lending has been more circumspect. We don’t know if we’re heading for an economic downturn, but if we are, Lloyds is doing so from a position of relative strength.
Jordan Hiscott, chief trader at ayondo, says No.
Can any domestic UK bank be bullish about its finances after the vote to leave the EU? The 3,000 job losses and 200 branch closures Lloyds has just announced paint an entirely different picture. Let’s not forget, this is the UK’s biggest mortgage lender, 10 per cent owned by the UK tax payer. It’s clear that the bank is seeking to cut as many costs as it can before the period when Article 50 could be triggered and the true outcome of Britain leaving the European Union becomes apparent. Key here is the uncertainty surrounding a broad range of challenges now facing the company: a EU cross-border banking licence, free movement of employees, conduct of business within the EU and a general devaluation of sterling, not to mention the possible implications of negative interest rates on UK current account holders. While it’s often necessary to focus on the positive to calm the market, these are the details that will need to be closely monitored over the coming months.