Were you disappointed when you heard that new chancellor Philip Hammond had scrapped the government's plans for a retail offering of Lloyds Banking Group(LSE: LLOY) shares? It would surely have been oversubscribed and we wouldn't have got many each, but I'd have been happy with even just a few.
I reckon it would be madness to sell them off in the current climate at as little as 53p apiece today. But what will annoy many private investors is that the shares will now be going to the fat cats in the City via a phased offload scheme over the next 12 months.
The government made a noise about helping private investors get on to the share ownership ladder, but now that there are bigger things to occupy the minds of the electorate (such as the shambles that Brexit looks like turning into), it seems to be business as usual.
Should we buy?
So, with that option swept away from us, the question now is whether you should buy or sell Lloyds shares on the open market -- and as a shareholder who's holding on for the long term, I'd say buy.
Obviously the EU referendum result has hurt Lloyds shares, and they're down 26% since polling day -- and all our banks would be hurt if they really do lose out on passporting rights that allow them to provide a raft of services across the EU. But so far, Lloyds hasn't suffered from any immediate impacts, and it's looking like the cheapest of the big FTSE 100 banks.
We have a couple of years of falling earnings forecast, and those expectations have been cut back since the vote. But that still puts Lloyds shares on forward P/E multiples of only 7.3 this year followed by 8.4 next. That's while the bank's dividend yields are expected to top 6%, and though those forecasts might now not be met, there's still plenty of headroom there.
Compare that with Barclays and HSBC, which are on P/E ratios of around 16 and 14 respectively, and Lloyds looks cheap -- Barclays' P/E does drop to 10 on 2017 forecasts, but that's with dividends expected to yield under 2%. Even Royal Bank of Scotland, which is way behind the rest in recovering from the financial crisis, commands a P/E of 14.5.
Lloyds looks to be about the best capitalised too, coming out top of the UK in the recent EU-wide stress tests with a fully loaded CET1 ratio of 10.1%. Lloyds described the result as "significantly above the group's minimum capital requirements," saying that it "reflects the de-risking undertaken and re-affirms the strong capital and balance sheet position of the group."
So what's keeping Lloyds shares so low? Well, the extension of the PPI claims deadline by the Financial Conduct Authority certainly hasn't helped, and Lloyds' status as the UK's biggest mortgage lender might scare those who fear a cooling property market (and who have similarly pushed down the share prices of our big housebuilders). But the PPI scandal will end, and the long-term demand for UK homes won't.
The risk has increased for sure, but after the price crash I still see Lloyds shares as a bargain.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.