When it comes to finding FTSE 100 stocks for 2022, there are a couple of companies that really stand out to me as being primed for growth next year. One of these is Lloyds (LSE: LLOY). I think multiple upcoming catalysts could drive the stock higher in 2022, as the UK economy starts to rebuild after the pandemic.
The outlook for the Lloyds share price
Around 70% of the profits earned by FTSE 100 companies are generated outside the UK. This puts Lloyds in a unique position.
Unlike many of its blue-chip peers, the lender generates virtually all of its income in the UK. This means its performance is closely tied to that of the broader economy, more so than other lead index stocks.
As such, the Lloyds share price has suffered more than other of the top 100 stocks over the past year as the pandemic has ravaged the economy. But I think this is about to change. The economic recovery is starting to gain traction, and interest rates may be on the way up. Moreover, Lloyds has enormous amounts of capital to deploy in growth initiatives.
The bank has outlined plans to invest £4bn over the next few years. It is looking to boost its wealth management business and its build-to-rent housing division. The group wants to become one of the largest corporate landlords in the UK. It is uniquely positioned to do so as one of the country’s largest mortgage lenders.
Considering the tailwinds outlined above and the group’s own growth plans, I think sentiment towards the Lloyds share price could begin to shift in 2022. This is why I would acquire the shares ahead of what could be a transformative year for the organisation.
Having said all of the above, I think the bank will also face some risks and challenges over the next 12 months as well. These could include higher costs and additional regulations. Both of these challenges could dent the group’s profit recovery as they will have an impact on profit margins.
Further, there is always going to be the risk that another aggressive coronavirus variant could throw the world back into disarray. I will be keeping these risks in mind when I invest in the stock and regularly review the position.
Even after taking these challenges into account, I think the outlook for the Lloyds share price is dramatically better than it was a year ago. That is why I would be happy to buy the shares for my portfolio today. And it is also why I would gladly hold onto the stock for the next year, at least.
I think this could be an excellent way for me to capitalise on the UK economic recovery. I also believe Lloyds is one of the most undervalued companies in the FTSE 100.
The post The Lloyds share price is one of my top FTSE 100 picks for 2022 appeared first on The Motley Fool UK.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.