LYG: Lloyds TSB Group is a Buy

LYG is taking a real beating due to concerns that really may not be at all valid. This is a top-notch financial services company that indeed is exposed to the mortgage crisis. But not the US mortgage crisis. LYG originates their own mortgages and they are top notch. They continue to be best of breed in the UK, and all this "bad news" is about a portfolio of loans they signed off on that were not originated by them. It was reviewed and approved by them, and LYG standards are very high. There is seems to be no reason to fear these guaranteed loans will under perform. Finally, as the UK mortgage business is not in the sorry shape that the US market is in because UK banks did not soften their lending criteria. Their loans were based upon borrower income and ability to pay, not on a presumption of endlessly increasing property values. So it is unlikely that there will be the high number of defaults and foreclosures that we are seeing in the US. The property values in the UK are indeed coming down, but since there are no balloon notes coming due or rates adjusting absurdly up, this should simply reflect a slow down in the market, not a collapse.