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Tuesday newspaper share tips: Lloyds, Aldermore, Hunting

By Conor Coyle

Date: Tuesday 06 Sep 2016

Tuesday newspaper share tips: Lloyds, Aldermore, Hunting

(ShareCast News) - Lloyd's Banking Group will continue to struggle as downgrades from two brokers showed, sending its shares promptly lower, according to The Telegraph's Questor column.

Things had been looking up for potential investors in the bank at the start of the year as the government prepared a stake sale - a major stepping stone on the path back to private ownership.

However, fears over the global economy dashed those hopes and then cam Brexit.

Contrary to fears in some corners for the market, the policies adopted by the Bank of England's in the aftermath of referendum vote would in fact benefit Lloyds, according to Questor.

With the impact of lower interest rates on its largely variable interest rate mortgage loan book more than offset by cheap liqudity, courtesy of the Old Lady on Threadneedle Street.

"The cut to Bank Rate means that returns on these variable mortgages will sink even lower, costing the bank £456m in forgone annual income, according to analysts at Deutsche Bank", the column says.

In the longer term however, the rism is that economic headwinds dampen returns on other types of loans, and the bank's lack of diversity - unlike Barclays or HSBC - puts it at a disadvantage, Questor said.

"Unlike more diverse banks such as Barclays and HSBC, which have fought to keep their investment banking arms functioning throughout major restructuring since the financial crisis, Lloyds does not have a large City business that it can turn to when there are leaner times in consumer finance."

Lloyds is desperately trying to cut costs to make itself more profitable, but at three per cent its dividend payout is nothing to write home about and challenger banks such as Aldermore and Secure Trust Bank offer more enticing growth prospects.

'Avoid', said Questor.

Conditions in the oil services sector continued to be as murky as the holes that Hunting helps to drill around the globe, but patient investors might be rewarded, The Times´s Tempus said.

The company had slashed its staff numbers by almost half since the end of 2014 and shut three factories in response to the collapse in crude energy futures.

Despite that, at the half-year stage of 2016 the company produced an underlying loss of $50.8m, worse than $20.4m suffered one year ago. In parallel, its debt facility had also been run down by half, to $200m, notwithstanding management´s decision to defenstrate its dividend payouts until 2018.

Yet the shares rose following the news.

With the price of oil on international markets showing signs of stabilisation and the number of rigs in operation in the key American market on the rise investors bought into Hunting directors' talk of "fragile optimism" in the market.

Recent share price gains mean that those hoping to pick a bottom may have missed the boat, although Hunting looks underexposed to those segments of the market which stand to gain the most when the tide turns, the tipster explained.

Nonetheless, and despite the risk that another year or two of pain might still lie ahead, "eventually it may reach the sunlit uplands investors are holding out for."

So, despite the still highly uncertain conditions in the oil market, 'Hold', Tempus said.


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