One Factor Driving Lloyds Banking Group (LYG) Stock Down Today

NEW YORK (TheStreet) -- Shares of Lloyds Banking Group  (LYG) fell 1.29% to $4.97 in afternoon trading Tuesday on news the British financial institution could sell a second round of shares in TSB Banking Group, in which it owns a majority share, according to Reuters.

TSB is about to enter a "closed" period prior to its third-quarter earnings on Oct. 24, so an offer could come this week, though the timetable is not certain, a source told Reuters.

Lloyds sold a 38.5% stake in Britain's seventh-largest lender in June in a deal that values TSB at $2.1 billion. The offering was 11 times oversubscribed and earned strong demand from U.S. and U.K. investors.

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Lloyds agreed not to sell any shares for 90 days after the first sale, but the lock-up period expires when the market closes Tuesday. The financial institution could sell its TSB shares starting on Wednesday and will have a short window of time to make a sale prior to TSB's closed period.

European regulators forced Lloyds to sell the 631 TSB branches as a condition of giving government aid to the banking group during the financial crisis. As a result, Lloyds must sell all of TSB by the end of 2015.

More than 15.3 million shares had changed hands as of 1:03 p.m., compared to the average volume of 2,636,980.

Separately, TheStreet Ratings team rates LLOYDS BANKING GROUP PLC as a "hold" with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LLOYDS BANKING GROUP PLC (LYG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for LLOYDS BANKING GROUP PLC is rather high; currently it is at 52.42%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -8.25% is in-line with the industry average.
  • LLOYDS BANKING GROUP PLC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, LLOYDS BANKING GROUP PLC continued to lose money by earning -$0.08 versus -$0.13 in the prior year. This year, the market expects an improvement in earnings ($0.54 versus -$0.08).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.8%. Since the same quarter one year prior, revenues fell by 12.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Commercial Banks industry and the overall market, LLOYDS BANKING GROUP PLC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income has significantly decreased by 1491.5% when compared to the same quarter one year ago, falling from $55.83 million to -$776.81 million.
  • You can view the full analysis from the report here: LYG Ratings Report

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