In This Article:
Key Insights
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Given the large stake in the stock by institutions, Lloyds Banking Group's stock price might be vulnerable to their trading decisions
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The top 24 shareholders own 50% of the company
To get a sense of who is truly in control of Lloyds Banking Group plc (LON:LLOY), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 84% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And last week, institutional investors ended up benefitting the most after the company hit UK£32b in market cap. One-year return to shareholders is currently 8.9% and last week’s gain was the icing on the cake.
Let's delve deeper into each type of owner of Lloyds Banking Group, beginning with the chart below.
View our latest analysis for Lloyds Banking Group
What Does The Institutional Ownership Tell Us About Lloyds Banking Group?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors have a fair amount of stake in Lloyds Banking Group. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Lloyds Banking Group's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Lloyds Banking Group. BlackRock, Inc. is currently the largest shareholder, with 9.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.4% and 4.6%, of the shares outstanding, respectively.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 24 shareholders, meaning that no single shareholder has a majority interest in the ownership.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.