Tuesday newspaper share tips: What to make of the Lloyds share offer

The government’s share offer of Lloyds Banking Group shares may seem attractive with a 5% discount off the market price and a promise of bonus shares. But what did the newspaper pundits make of the deal?

The Times’ Tempus in its special report thinks it looks promising and suggests that there’s no hurry. With a proposed spring 2016 sell off, it said investors should decide at the last minute if it’s worth investing.

However as with all investments, there are risks. For Lloyds, the big challenges are the PPI scandal and the Competition and Markets Authority investigation into retail banking. But Tempus highlighted there’s a proposed deadline for PPI claims and nothing radical expected from the CMA about Lloyds. But the biggest challenge will be the economy.

“All banks are, in effect, geared bets on the economies in which they operate,” Tempus said. “So long as Britain prospers, Lloyds will struggle to go badly wrong.”

Tempus thinks the group has some good prospects for income and capital growth, as well as the discount through the share offer, and that it’s worth pre-registering but waiting.

But The Telegraph’s Questor doesn’t agree, and thinks it’s an opportunity investors should let pass.

Ignoring the discount and bonus shares and focusing on the long term value, it said “it would be prudent to consider a world where impairments are higher than the current lows and a housing market that is slightly weaker”.

Lloyds brings back painful memories for this speculator with the 2007 crash, the subsequent government bailout and the years of no dividends to investors. It also noted the valuation isn’t that cheap at the current price, with shares trading for 20 times the forecast earnings per share.

But Questor has had a look through the books and is concerned by the £450bn of loans to customers, over half of the company’s assets, compared to the shareholders equity of £42bn. “It doesn’t take much of a movement in the value of those assets to have a serious and negative impact on the value of the shares.” On that basis, Questor advised caution and said to avoid the offer.