How to Buy Lloyds Bank Shares Online in the UK

Lloyds is a hallmark UK financial institution that offers a variety of banking services. This includes traditional lending, credit cards, mortgages, and business finance.

Although its shares are worth just a fraction of what they were pre-2008, Lloyds could still represent a viable investment at current prices. This is especially the case in the midst of the COV-19 pandemic, not least because the banking firm has since seen its stocks tumble.

In this guide, we show you how to buy Lloyds shares online in the UK. On top of showing you how to make a purchase, we also discuss the best UK brokers to do this with.

Step 1: Find a UK Stock Broker to Buy Lloyds Shares

Lloyds shares can be purchased from hundreds of different online stock brokers. As no-two platforms are the same, you need to do some homework before opening an account. For example, you need to look at factors like commissions and fees, supported payment methods, minimum investment amounts, and of course – regulation.

Below you will find a small selection of the best UK stock brokers allowing you to buy Lloyds shares from the comfort of your home.

1. IG – Trusted UK Share Dealing Platform With Competitive-Fees

IG is an online broker that gives you access to over 10,000 shares. The platform is headquartered in the UK and first entered the brokerage arena in 1974. Since then, IG has attracted a client base of over 239,000 investors. In terms of buying Lloyds shares, you can achieve this goal at a commission of £8 per trade. This means that you will pay £8 when you buy Lloyds shares, and again when you sell them.

If you think that you will be buying and selling shares on a regular basis, you can actually get your commission down to just £3. In order to do this, you will need to place at least three buy or sell orders in the previous month. On top of Lloyds shares, IG lists hundreds of other UK companies. You can also invest in dozens of international markets with ease. This is great for building a diversified portfolio through a single platform.

Additionally, IG also offers CFD and spread betting services. This gives you the opportunity to place more sophisticated trades on Lloyds shares. For example, both mediums allow you to short-sell Lloyds – meaning that you can profit if the shares go down. You can also apply leverage of up to 1:5 if you’re a retail client, and significantly more if you come from a professional trading background. The spread betting service specifically allows you to make profits without paying capital gains.

IG gives you a few options when it comes to selecting your preferred trading platform. For example, you can trade via the IG website or download MetaTrader 4. You can also buy and sell shares via the IG investment app – which is available on iOS and Android devices. If you like what IG has to offer, accounts can be opened online and require a minimum deposit of £250. You can do this with a debit card, credit card, or bank account transfer. IG is regulated by the FCA, alongside other licensing bodies.

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Step 2: Research Lloyds Shares

So now that we have discussed the best UK stock brokers to buy Lloyds shares from, you now need to do a bit of research. This is crucial whether you’re investing in Lloyds or similar shares like HSBC shares, as you need to be sure that the assets represents a viable investment.  In order to help clear the mist, below we list some background information on Lloyds and where the markets think its shares are likely to go in the near future.

Lloyds Share Price History

Lloyds Banking Group PLC – more commonly referred to as Lloyds – is a major UK bank that traces its roots back to 1695. The bank as we know it today is actually a merger of two UK financial institutions – Lloyds TSB and HBOS. In terms of its stock, Lloyds is listed on the London Stock Exchange.

It is also a constituent of the FTSE 100, and carries a market capitalization of £19 billion as of August 2020. When the aforementioned merger took place in 2014, the Lloyds share price was around the 75p mark. Since then, the shares have been moving in a southward direction.

For example, at the turn of 2020 Lloyds shares were priced at 63p. This means that over the course of six years, investors were looking at losses of 16%. With that said, the downfall of Lloyds was further amplified by the wider impact of COV-19. This wasn’t just the case with Lloyds, but the vast bulk of the UK banking scene.

Nevertheless, the shares hit 32p in March, translating into a share price of reduction of almost 50% in just under three months. However, the wider FTSE 100 index recovered by 16% by August while Lloyds shares continued to tumble. Lloyds shares have since begun climbing and are at nearly 48p per share as of May 2021. The shares remain 16% below their pre-pandemic price level.

Lloyds Shares Dividend Information

It seems to be going from bad to worst for Lloyds shareholders, not least because the firm suspended its dividend policy in April 2020. With that being said, the suspension was initiated by the Bank of England. This wasn’t only the case with Lloyds, but the rest of the UK banking sector.

The Bank of England got involved as a means to protect UK banking capital and thus – free up the need to distribute dividends. Crucially, there is no knowing how long it will be before Lloyds resumes its dividend policy, so capital gains will need to be the main focus in the short-to-medium term.

Should I Buy Lloyds Shares?

Although the above information is important, you as an investor should be more concerned with the future. In other words, just because it has been somewhat of a tough few years for Lloyds, that isn’t to say that the UK banking giant represents a bad investment.

After all, seasoned investors will base their decision on the current value of the shares, and how this relates to projected future cash flows.

Below we list some of the most important points that you need to consider before buying Lloyds shares.

Huge Upside Potential

While it has been doom and gloom for Lloyds and its ever-dropping share price this year, some would argue that now actually represents a shrewd time to enter the market. This is especially the case when you consider the price of Lloyds shares at the turn of 2020 and thus – before the pandemic was taken seriously by the markets.

The said price stood at 63p on January 1st. Today, the very same shares are priced at 48p. With that in mind, a return to January levels would translate into growth of 25%. While it remains to be seen if and when the bank can get back to the 63p-mark, there is plenty of upside potential at current pricing levels.

Mortgage Holidays and Bad Debts

On the flip side, the reality is that Lloyds could be facing some very difficult times in the coming quarters. First and foremost, the government lockdown resulted in homeowners having the option of applying for a mortgage holiday.

This was heavily received, and no doubt a major strain on much-needed cash flow for Lloyds. Similarly, it is all-but-certain that the bank will begin to see an upsurge in bad debt. In fact, management at Lloyds has already noted that it has increased its provision for such an instance.

Interest Rates at Record Lows

Although interest rates were low before the pandemic came to light, the Bank of England made the decision to reduce this even further to just 0.1%. Crucially, this is bad news for Lloyds and the wider UK banking sector. After all, interest rate cuts are typically passed on to borrowers due to increased competition.

You then have loans that specifically track the Bank of England base rate. This means that lending margins for Lloyds have once again been squeezed. In turn, this results in lower operating profits.

The Financials

In terms of the financials, Lloyds reported a 7% reduction in profits year-on-year in February 2020. To follow suit, net income was down 4%. For stockholders, earnings per share dropped by a huge 36%.

However, this was largely due to the firm’s substantial PPI settlement. Additionally, net interest dropped to just 2.88%. For those unaware, this is the difference between the average interest rate charged to borrowers, against what the bank pays to savers.

In terms of the positives, Lloyds was able to cut operating costs by 4%. However, the bank saw an increase in bad loans – with the figure rising by 38%.

Shareholders should expect this number to once again grow, as per the previously mentioned bad debt provision. With that being said, Lloyds was planning to pay a final dividend of 2.25p earlier in the year. This would have represented a 5% increase from the prior 12 months. However – and as we covered earlier, this was subsequently suspended by the Bank of England.

Lloyds Bank Shares Buy or Sell

Lloyds shares have been slow to recover in the wake of the COVID-19 pandemic thanks to ultra-low interest rates, a government-imposed mortgage holiday, and declining earnings. However, as the UK economy has begun to recover, Lloyds has shown some signs of growth. The shares have more than doubled in the past 6 months, and they still have a 25% upside to get back to their pre-pandemic levels.

Given that, we think that Lloyds shares are a buy today – with some caveats.

Investors need to be aware that the recovery is likely to be slow. The UK will likely keep interest rates depressed for at least the next year, which will limit Lloyds’ profit margins. At the same time, economic damage wrought by the pandemic could lead to significant losses on mortgages and other loan products.

If you’re willing to be patient, though, Lloyds shares are attractive. The bank was able to easily weather a massive economic shock, even if the stock price took a hit. In addition, Lloyds continues to pay out a dividend yield of 2.3% – a nice reward for investors who stick with the company.

The Verdict

If you’ve read our guide all of the way through, then you will know that Lloyds shareholders had a tough 2020. The shares are down by over 50% since the turn of the year and the firm has since been forced to suspend its planned dividend. With bad debts expected to increase and consumers making full-use of the government’s mortgage holiday safety-net, this has further amplified the issues being faced by the wider UK banking space.

However, it is important to remember that Lloyds shares were hovering above the 60p mark at the turn of the year. The wider impact of the coronavirus pandemic was beyond the bank’s control, which is why there might be some upside based on current prices.

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