Lloyds shares dived 20%, but are now bouncing back!

The past few weeks have been tumultuous for shareholders Lloyds Banking Group (LSE: LLOY). As the crisis shook regional US banks, Lloyds shares fell from February highs.

At the height of this latest crisis, Lloyds’ share price fell by almost a fifth. But then the financial market bounced back after the emergency bailout of the giant Swiss bank Credit Switzerland on March 19.

Savings is a roller coaster ride

On February 9, Lloyds shares hit a 52-week peak of 54.33p. But as fears of banking contagion swept the market, bank stocks nosedived.

The highest value of Lloyds shares in March 2023 is 43.66 US Dollars. This resulted in a 19.6% drop in just 39 days. This is a pretty steep fall for ‘boring’ FTSE 100 stock.

As bank stocks dive, trading volume rises. During the year, an average of 209.5 million Lloyds shares were traded each day. On March 17, more than 587.4 million shares changed hands. Wow.

As the banking panic subsided, stocks bounced back. On Thursday, the stock closed at 49.02p, leaving it 12.3% above its March low.

Here’s how this stock has performed over six periods:

Five days	+1.8%
One month	-5.9%
Year to date	+7.0%
six months	+15.1%
A year	+8.5%
five years	-28.8%

Despite the recent ructions, the stock has risen by 7% in 2023. This beats more FTSE 100 gain of 3.9% (all returns excluding cash dividends).

The Big Four bank shares have also beaten the Footsie for the year, rising 8.5% against 0.9%. Over the past half decade, it has lost almost 29% of its value, compared to a 6.6% gain for the FTSE 100.

I hold my shares

My husband bought Lloyds shares for the family portfolio at the end of June 2022 at 43.5p per share. At a recent low, our earnings per share have crashed to just 0.16p. Today, we have recorded a paper profit of 12.8%.

That said, we have no intention of selling anywhere near current levels. For me, the stock is priced for long-term disappointment, while I hope to increase the dividend and get more capital in the future.

Today, Lloyds is worth £32.6bn, making it a FTSE 100 stalwart. Still, I think the shares are undervalued, despite the latest rebound.

At 49.02p each, the shares trade on a price-to-earnings ratio of 6.8 and yield 14.7%. This doubles the return of the wider FTSE 100.

In addition, Lloyds pays a dividend yield of 4.9% per annum – about a quarter above Footsie’s cash yield. Even better, these payouts are guaranteed three times by their trailing earnings. To me, this seems like a solid margin of safety.

Then again, Lloyds’ 2023 earnings are set to be lower than in 2022. As the UK economy weakens and interest rates rise, banks’ debt and loan losses will rise this year.

Also, the ongoing cost-of-living crisis has eroded household budgets and consumer confidence – more bad news for corporate earnings.

However, I would love to buy more shares today – if I have money to spare, that is!