Lloyds share offer – James Horniman view

Historically a rising interest rate environment has been kind to financial stocks, which might lead investors to conclude that the Lloyds share offer – particularly with any potential Government incentives offered – represents an interesting opportunity.

Put simply, the argument is that higher interest rates suggests a thriving economy in which lending flourishes. Rate increases also create an opportunity for margins to expand, which boosts profitability.

The problem this time is that although rates going up might confirm the recovery from the financial crisis, the economic activity needed to make financials look attractive is not guaranteed.

The investment waters remain hazardous for the sector in general and banks in particular. For serious investors there may be better value in individual, well-managed UK insurers and asset managers. But for those looking to take a risk, the Chancellor’s sweeteners may prove tempting.

There’s no guarantee you won’t lose – just ask those who held on to their Halifax shares which converted into Lloyds shares and shrank to less than a seventh of their value through the financial crisis.

Historically investors have enjoyed the benefits of privatisation in the UK. Reprivatisation may not be so rewarding.

James Horniman

You should not act on this content without taking professional advice. Opinions and views expressed are personal and subject to change. No representation or warranty, express or implied, is made of given by or on behalf of the Firm or its partners or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this document, and no responsibility or liability is accepted for any such information or opinions.

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies. Fluctuations in interest rates may affect the value of your investment. The levels of taxations and tax reliefs depend on individual circumstances and may change. You should be aware that past performance is no guarantee of future performance.