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

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The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.

James Hambro & Partners