Within the FTSE 100, there’s a broad range of different types of companies. One interesting firm included is the Scottish Mortgage Investment Trust (LSE:SMT). It’s a collection of stocks managed as an investment trust by Baillie Gifford, a money manager. Yet as it’s publicly listed, I can buy and sell shares with ease. Over the past year, the share price has increased by 2.3%. Here’s why I think it could be a top FTSE 100 buy for me in 2022.

A short-term fall 

Before anyone points their finger at me, I do need to address one technical point. When I say that this is a cheap FTSE 100 stock, I’m not talking about the difference between the share price and the net asset value. Given that SMT holds multiple stocks, there’s a net asset value of all of the stocks combined. In theory, the share price should reflect this value. In reality, it doesn’t always do this, so the share price can be higher or lower than the actual asset value.

Currently, it trades around the same level. As it’s not at a discount, it isn’t cheap from this point of view. From my point of view, the share price is cheap because the stocks within the trust are also cheap!

For example, the share price is down almost 10% over the past month. A lot of this has to do with the sell-off in growth stocks, particularly in the NASDAQ. From reviewing the top holdings, there’s a decent exposure to the NASDAQ. This includes the likes of Tesla, NVIDIA, and Illumina. 

Although I have mixed opinions on the value of Tesla, I think that the slump in growth stocks over the past month has been overdone. This was mostly driven by concerns around Omicron and the pace of monetary policy tightening by central banks. I don’t think either of those points warrant long-term concern. Therefore, this 10% fall in the past month makes me want to buy the potential dip in this top FTSE 100 stock.

A top FTSE 100 stock, but with caveats

Another reason why I think SMT has good value is because I’m buying the shares that give me exposure to a professional money manager. I think that 2022 will be a much more challenging year to be a smart stock picker versus 2021. Although I back myself, I’m happy to give some of my funds to invest it in a stock like SMT. The manager can then actively manage these funds on my behalf. As I have the ability to sell at any time, I’ve not locked up my money for a long period of time.

Clearly, I do need to think about the risks. One is that the share price doesn’t always track the net asset value. I might come to sell in the future and find that the share price is well below the actual value of the stocks. 

Another risk is that if we see a stock market crash, the SMT share price is likely going to be hit hard given the exposure it has to growth stocks. However, on balance I’m still considering buy shares in this top FTSE 100 stock for my portfolio.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. 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.

The Rolls-Royce (LSE:RR) share price was 112p at the start of 2021. It finished the year 10% higher (9.71%, more precisely)  at 122.88p. In 2021, the shares traded as low as 87p and as high as 147p.

While the pandemic and Rolls-Royce’s response to the crisis explain a lot of the moves in the company’s share price, only considering 2020 onwards ignores essential points about the Rolls-Royce story. However, it’s an excellent place to start.

Rolls-Royce shares started 2021 poorly

The pandemic hurt Rolls-Royce as it generates a good chunk of revenue monitoring and servicing the engines it supplies for aircraft. If aircraft are not flying, the billable service hours drop. Rolls-Royce reported a £4bn underlying pre-tax loss for the 2020 fiscal year compared to a £583m profit in the previous year. A £5bn rescue package was announced in early October to help prop the company up. This included a £2bn rights issue, £2bn bond sale, and a further £1bn in other loans. These measures will dilute shareholder returns for years to come. Rolls-Royce shares slumped to 40p in October 2020.

A more optimistic outlook about the pandemic helped Rolls-Royce shares climb from October onwards. However, the emergence of the Delta variant was a headwind in late 2020 and early 2021. In March 2021, the Norwegian government blocked the sale of a Rolls-Royce owned engine business, which would have contributed to a planned £2bn asset sale to further shore up the company’s balance sheet. March 2021 was also when those 2020 losses became official. Rolls-Royce shares drifted back to 87p in July 2021.

As summer 2021 rolled around, international travel was starting to pick up again. Vaccine programmes were a success. The pandemic outlook had again improved. Rolls-Royce defence and power generation businesses were doing well and helping to support the as yet unrecovered civil aviation business. An underlying operating profit of £537m for the first half of 2021 was reported compared to a loss of £1.6bn in 2020. Rolls-Royce also made headway with its small modular nuclear reactor (SMR) project. The company’s share price moved higher, hitting a 2021 high of 150p in November.

2022 and beyond

Another coronavirus variant, Omicron, emerged towards the end of 2021. Again, this caused investors to sell so-called “re-opening” stocks like Rolls-Royce. So, Rolls-Royce finished 2021 a little off its year’s high at 123p. It is safe to say that the end of the pandemic, particularly air travel getting back to normal, will be positive for Rolls-Royce as it generates around half its revenues from this.

However, Rolls-Royce cannot blame all its current woes on the pandemic. Its margins have been worsening since 2015. Problems with its Trent 1000 engines, which are now resolved, predated the pandemic. When the industry pivoted to slimmer planes, a decision to concentrate on wide-body aircraft engines was a strategic misstep.

Still, travel will eventually get back to something close to its pre-pandemic levels. Rolls-Royce is introducing more narrow-body engines. It has managed to sell off unwanted businesses, and the SMR project looks interesting. 2022 might be a brighter year for Rolls-Royce; after all, it could hardly get much worse than 2020 or the first half of 2021.

James J. McCombie does not own shares in any of the companies mentioned in the article. The Motley Fool UK has no position in any of the shares mentioned. 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.

The price of gold fell about 4% over the course of 2021, which was its biggest decline since 2015.

This is because as global economies opened after the Covid pandemic, investors became more optimistic and moved towards riskier assets. Money has found its way into the equity markets and away from safe-haven assets such as precious metals. Even high inflation failed to help the price of gold. The prospect of higher interest rates steered investors to other assets rather than buy the valuable metal.

As we start 2022, it now seems a good time to take a look again at gold in my own portfolio.

Investing in gold

Thinking about my own holdings, I want to try to reduce my downside risk. Though there are many different options, I like the idea of gold as a hedge against a sudden market downturn.

The price of gold is largely seen as negatively correlated with stock prices. When the market falls investors tend to flock to the asset for safety. This happened in 2020 and though in investing there are no guarantees, if another crash happens it’s likely to be the same again.

There are various options for investing in gold. I can buy physical gold via a broker or the Royal Mint, but I need to consider how to keep it. Storage costs can be expensive. 

For my own portfolio, I prefer investing in gold through an ETC (exchange-traded commodity). This is a fund that tracks the spot price of gold, but trades like a share and that you can buy and sell through most online brokers.

There are lots of ETCs available with many investment management companies offering one. In choosing one for my own portfolio, I always look at factors such as fund size and management charges. My preference for some time has been iShares Physical Gold ETC (LSE:SGLN). This has been going since 2011, is large in size (over £9bn), and has a low ongoing charge of 0.15%.

Performance and outlook

Of course, the ETC lost money during 2021, reflecting the decline in the price of gold. However, over five years, the ETC is up around 40% and over 10 years, it has risen around 25%.

In the first couple of days of New Year trading, this ETC has remained broadly flat. Despite that, looking ahead to 2022, there’s a lot of global uncertainty that could play into the hands of gold. First, if central banks fail to raise interest rates, assets such as high dividend shares may see capital outflows in favour of gold. Second, geopolitical tensions, especially looking towards Russia and the Taiwan Strait, could see money move towards the precious metal as a safe-haven bet.

Moreover, the key to building any resilient investment portfolio is diversification and gold is still considered by many professional investors as a sensible portfolio component.

I could be wrong, but I still think of iShares Physical Gold ETC as a hedge against stock market uncertainty and continue to be comfortable holding a small allocation of it within my portfolio.

Niki Jerath owns shares in iShares Physical Gold ETC. The Motley Fool UK has no position in any of the shares mentioned. 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.

Online fast-fashion firm Sosander (LSE:SOS) had an excellent 2021. I believe 2022 could be even better. Here’s why I’m considering adding this penny stock’s shares to my portfolio now.

Meteoric rise

A lot has been written about the death of the high street shopping experience in recent years. Many established retailers have fallen by the wayside in recent times. The pandemic has exacerbated this and consumers find themselves clothes shopping online more than ever. The rise of online-only fast fashion firms has taken the world by storm. This has been supported by technology evolving rapidly too.

Sosander was established in 2016 and joined the FTSE AIM just a year later. It is a women’s fast fashion brand selling clothes and accessories for a multitude of occasions and day to day wear too. Impressively, it has lucrative partnerships with established firms such as Next and Marks and Spencer.

Last year was an impressive one for Sosander. The share price rose 82% in 2021 from 17p per share to current levels of 31p.

Why I like Sosander

My bullish stance towards Sosander stems from two main aspects. These are macroeconomic factors and internal company factors. I believe both of these could favour its growth trajectory and make it one of the most exciting penny stocks on the market for 2022 and beyond.

From a macroeconomic perspective, online fast-fashion is a booming market that will only continue to grow. The impact of the pandemic has been largely positive on a burgeoning industry. Many other online fashion firms have reported record customer numbers and sales. This new way of life could continue and the pandemic shows no signs of disappearing too. Firms like Sosander will benefit in my opinion.

From an internal company perspective, I like Sosander due to its company structure. It is a relatively small firm, which means a lot of insiders own stock. I am usually buoyed when insiders own significant amounts of stock. This tells me their interests are aligned as they want a return on investment on their own money and can make it happen by helping the company succeed. In addition to this, who better than insiders to know whether a firm is on an upward trajectory. I keep an eye out for insiders buying shares.

A positive trading update released today by Sosander for the three months ending 31 December made for excellent reading too. Revenue was up 122% compared to the same period last year. Active customers and average orders also increased compared to the same period last year.

Penny stocks have risks too

Sosander is a relatively small firm in a big industry. One concern is that it could get out muscled by larger, more established competition. Secondly, when small companies try to grow rapidly, there are often growing pains. These can be such things as technological and infrastructure related so I must be wary of these issues. Both risks can impact performance and any return on my investment if I bought shares.

Overall I believe Sosander is heading for an excellent 2022 and beyond. It is an exciting penny stock that had a breakout year in 2021. I am buoyed by its progress to date including its excellent strategic partnerships as well as recent trading. Favourable market conditions should help too. I would add shares to my portfolio at current levels.

Jabran Khan has no position in any of the shares mentioned. 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.

Buying shares can seem like something best suited to the rich. But I don’t think that’s the case. The reason some people are rich today is precisely because they once took the decision to start investing in the stock market with limited funds.

Even with £100, I’d consider buying shares and starting to build a portfolio for myself. Here are three reasons why.

1. Getting used to buying shares

To buy any shares with my £100, I’d need to set up some sort of share-dealing account. Putting that in place today would make it easier for me to trade shares whenever I wanted to in future. So even with a small initial sum, I could already establish something I would need to invest larger sums down the line.

Once I had my account, containing my own money, it could help me in another way. Many people imagine they could have made money because they once thought a particular share would be a good buy. But often they forget the other shares they also liked, that didn’t do as well. People also underestimate the impact of psychology on how investors behave. Having skin in the game is different to holding court down the pub.

That means that, if I put £100 into shares today, I might actually see my investments perform worse than I expected. If so, that’s a cheaper lesson than starting with a bigger amount. Hopefully, my investments would perform well. Either way, I’d learn about my own psychology as an investor. That is valuable knowledge for me if I have bigger sums to invest in the future.

2. Learning the market

As someone with a casual interest in shares, I could read selectively about companies. So, for example, I might zoom in on headlines about a company I liked such as Apple but not bother ploughing through its financial reports.

As an investor, over time, I would hopefully become more disciplined. I would develop my own investing style, whether or not I realised it. To assess whether shares suited my investment criteria, I would start to read more about things like their profit margins, free cash flow, and net debt. Instead of just looking at whether a business was attractive to me, I would focus on whether its shares looked like good value. That can be a very different thing.

The sooner I began that learning process, the better an investor I would hopefully become over time. Starting with £100 would give me concrete motivation to become an informed investor, not an armchair bore.

3. I might start investing and make money

As well as the benefits above, I might actually make money. After all, if I had been able to invest £100 in Apple a year ago, my stake would be worth £136 today. If I had put it in five years ago, my stake would be worth £585 now. I would also have received dividends. Even with limited funds, I might make a profit.

In practice, I wouldn’t have invested my £100 in Apple a year ago, for two reasons. First, a single Apple share cost over £100 then. With limited funds, some shares are simply too expensive to buy. Secondly, I always seek to reduce my risk by diversifying across different shares. I would apply that rule even when investing £100, for example by buying a diversified unit trust.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. 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.

I believe tech stock GB Group (LSE:GBG) could be one UK share set for an exciting 2022. At current levels, should I consider adding theshares to my portfolio? Let’s take a look.

Data driven

GB provides personal data verification tools as well as location services, ID document inspection, and fraud prevention services such as email address verification. GB’s services are driven by cutting-edge intelligence-based software.

As I write, shares in GB Group are trading for 694p per share. At this time last year, shares were trading for 934p, which is a 25% drop. This does not concern me. In fact, I see the current price as an opportunity to potentially add cheap shares to my portfolio. The fall in share price can be explained by a dip in demand for such products due to the pandemic. Analysts at Barclays believe GB Group shares will rise towards 1,000p.

The positives

GB Group is aiming to be a leader in its field and has the proprietary tech and strategy to succeed, in my opinion. The rise in demand for digital products and services is set to continue and therefore the demand for personal data based products will also increase.

A recent acquisition by GB Group has made me pay closer attention to it. I like when a firm I am reviewing for investment is acquiring competitors or firms to enhance its offering. It is a sign of ambition and growth. In November, GB announced it would be acquiring a US firm, Acuant. This acquisition has the potential for GB to cement itself as one of the biggest players in the identity management space in the world. The US market is extremely lucrative and this deal will only enhance its footprint in the US market.

Finally, GB’s performance recently has been positive and with the new acquisition, I expect it to continue on an upward trajectory too. In its most recent half-year report in November, GB announced that revenue grew by nearly 6% compared to the same period last year. This resulted in its small debt from last year’s half-year results turning into a healthy cash balance of £39m. Operating profit increased by 3.5% and two new products were launched to market as well.

UK shares have risks too

There are two main risks I see linked to GB that could affect progress and my investment. Firstly, competition in the tech market is intense. There are lots of large players that perhaps have a better brand recognition as well as footprint that could ramp up their identity management and data intelligence arms.

At current levels, GB shares still look a bit expensive despite dropping in recent months. There is a risk that future potential from the acquisition is already priced.

Overall, I like GB Group and think it could be a great addition to my portfolio for 2022 and beyond. It is making the necessary moves to enhance its footprint and become a market leader in its field. GB’s latest acquisition is exciting. I would not be surprised to see record results posted for the full year and its share price to increase. I would add GB Group shares to my portfolio at current levels.

Jabran Khan has no position in any of the shares mentioned. 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.

The metaverse expansion is underway and the internet’s future is exciting. I think picking a top metaverse share for my portfolio is a no-brainer right now. And with major brands already investing heavily in the project, two names are now congruent with the ‘meta.’ Roblox (NYSE:RBLX) and Nvidia (NASDAQ: NVDA) enjoyed a tremendous 2021, cementing themselves as the top metaverse stocks. Both operate on opposite ends of the metaverse and here I look at what makes either stock a good option for my portfolio.

Powering the meta

Nvidia is a semiconductor superpower and is an established graphics processing unit (GPU) brand in the gaming world. It is now the leading metaverse hardware developer with an 83% market share. Investors finally caught up to the potential of the company and the share price rose 125% in 2021, making it one of the top global performers last year. But do I think this rise is justified? The answer is a resounding yes.

Given the expansion of virtual worlds, the computing and graphic capabilities of the average computer or console has grown rapidly in the last decade. This demand caused Nvidia’s revenue to jump over 100% in just three years. Its premium chipsets have grown in both capacity and price. And the firm is making the transition to offering a software framework via the Nvidia Omniverse. The platform will allow creators to seamlessly implement graphic upgrades to existing virtual worlds.

But I think replicating this run in 2022 is very unlikely. At $276, the Nvidia share price is now trading with a mindboggling price-to-earnings ratio of 85 times. Analyst’s estimates suggest an 18%-20% growth in revenue this year, which is far from its 2021 revenue growth of 52%. Also, given the expenditure that comes with expansion, investors are taking profits right now and its share price has been falling since mid-December.

But I am not looking for explosive gains but the best stock to invest in the metaverse. And despite the huge overvaluation, I think Nvidia will continue its market reign as a computing powerhouse and could offer steady growth. Although I missed its incredible run last year, Nvidia still remains the top metaverse stock for my portfolio in 2022.

Meta gaming

I cannot overlook Roblox and its role in shaping the early days of the metaverse. After its listing in July 2021 at $45, the Roblox share price shot up to $135 in November. But it has fallen steadily since and is currently trading at $88. And I think Roblox’s value was grossly inflated given the pandemic gaming boom. 

Roblox’s surge in daily users last year means the platform now has over 50m unique games and is child-friendly. Both strong positives. But can it front the gaming revolution on the metaverse? I do not think so. The gaming world is so fragmented and full of diverse sects. I think there is so much scope for expansion and Roblox is just one piece of the puzzle.

It does not help that Roblox is still loss-making. Losses in 2021 stood at $348m and it could be years before the gaming company starts making money. It is too early to call how metaverse gaming will develop. The hardware, however, is a different question. Processors are crucial to creating this virtual world. This is why I think Nvidia is the top metaverse stock for me to buy today.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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I’ve been drawing up a list of UK penny shares I think have good prospects for 2022. Often, if a stock trades for under a pound, it reflects the business in question having certain risks, no matter how rosy its business prospects may otherwise look.

Yet even with such risks in mind, here are five penny stocks I’d consider holding in my portfolio this year and beyond. I’d characterise them as fast-growing as each one has seen its share price rise by more than 20% in the past year. In each case, I think there might be further gains to come.

Lookers

Car retailers have had a challenging couple of years, but that was truer for Lookers (LSE: LOOK) than for most of its rivals. A historic accounting scandal was uncovered at the firm, which diverted a lot of management attention and led to a restatement of past accounts.

That is now in the rear view mirror. The share price had grown 75% over the past year, at the time of writing this article earlier today. Despite that, I reckon there is continued possible upside for Lookers. A shortage of key components such as semiconductors has combined with supply chain issues to make some cars more scarce. That is good for profit margins on new cars. It has also boosted the sales price for second-hand vehicles. I think that could be good news for Lookers. In October, it upgraded its expectations for 2021 pre-tax underlying profits for.

I think the strong momentum could carry into 2022 and beyond, supporting a higher share price. But one risk the company itself has highlighted is uncertainty about vehicle availability. If carmakers cannot supply Lookers with what it wants to sell, that could hurt both revenues and profits.

Card Factory

Another penny share that had a fairly good 2021 was retailer Card Factory (LSE: CARD). Its shares are 55% higher than a year ago.

In its most recent trading statement, in November, the company said that it has continued its recovery from the pandemic. Its most recent quarter saw sales only 3% below 2019 levels. If the retailer can maintain its business momentum, I think 2022 could see it surpass its pre-pandemic performance. Its omnichannel model remains heavily dependent on its store estate. But with prime locations and a large customer base, I think the shops have a bright future. And if high street vacancies grow, it could be good for Card Factory’s profitability in the form of lower rents.

One risk is the company’s net debt. At the end of October it stood at £108m. That is lower than the same point the prior year, when it was £143m. But it remains high, at over half of the company’s market capitalisation. There is a risk of a future liquidity crunch, for example, if shops have to stop trading due to public health restrictions. That could badly hurt the share price.

Photo-Me

The photobooth and vending machine operator Photo-Me (LSE: PHTM) suffered during the pandemic, as reduced visits to venues such as shopping centres saw revenues fall. It has since staged an impressive recovery. The shares are 32% up on their level 12 months ago.

That is good news for the chief executive, who was a big buyer of Photo-Me shares when they fell. He now owns over 108m shares in the company. I think it could also present an opportunity for me. That is because I think the improving performance could continue in coming years. The pandemic accelerated certain business moves that could help position Photo-Me for future growth, such as adding more contactless payment options. Business areas such as launderette machines continue to show strong growth. I expect demand to stay resilient as people always need to do their washing.

Yet continued pandemic restrictions continue in many of Photo-Me’s Asian markets. That could hurt revenues and profits.

Stagecoach

Bus and coach operator Stagecoach (LSE: SGC) saw its shares grow 22% over the past year. A key reason for that was the announcement of a planned merger with rival National Express. The deal could be good for Stagecoach because it can cut combined costs. It also gives Stagecoach shareholders like me exposure to National Express’s national coach network.

The deal might not go ahead due to regulatory concerns about market dominance. If that happens, I still think the underlying Stagecoach business is attractive. It has deep experience in running bus services and a captive market on many routes. Some bus users who stopped travelling during the pandemic may never come back, though. That would make a big dent in revenues.

Lloyds Bank

It may sound odd for a penny share to have a market capitalisation of £36bn. But, with billions of pounds in profit forecast for the company’s full-year results due next month, Lloyds (LSE: LLOY) is unlike many penny shares.

The Lloyds share price stands 40% higher than a year ago. But I think a number of factors could help boost the bank’s share price further in 2022. I am hopeful it will use its mounting excess capital to fund a dividend increase. Sustained strength in the housing market could also lead to continued strong profits at the bank, which is the nation’s leading mortgage lender. Its growing rental property portfolio may also boost profits, although I remain wary of the risk that this could divert management attention. I am also concerned that it adds assets to the balance sheet that may lose value in the event of a future property crash.

My next move on these UK penny shares

Like all shares, those that trade for pennies carry risks. That is why I always like to diversify my portfolio. I already hold three of these shares and would consider buying the other two.

While all five shares grew more than 20% last year, we don’t know what will happen in 2022. I like the business model of each company and am optimistic about their prospects. Holding all five in my portfolio would give me some exposure to their upside potential, while also mitigating the impact on my holdings if any of the companies perform poorly in the coming year.

Christopher Ruane owns shares in Lloyds Banking Group, Lookers and Stagecoach. The Motley Fool UK has recommended Card Factory and 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.

2022 has started positively for shareholders in Lloyds Banking Group (LSE: LLOY). The Lloyds share price ended 2021 at 47.8p and closed on Wednesday at 50.87p, up 0.96p (+1.9%). It was only around 37p a year ago. Thus, the Black Horse bank’s stock has gained over 3p since 2021, a healthy rise of 6.4%. However, the shares could be affected by a number of scenarios in 2022-23, not least the spread of Covid-19. Here are five potential factors that could support and lift the stock over the coming 12 months.

1. Rising interest rates

After years of near-zero interest rates, the Bank of England raised its base rate last month. In December, bank rate rose from 0.1% a year to 0.25%. Although this is a tiny step, the BoE has indicated that the bank rate could rise several times this year to curb inflation. As interest rates rise, net interest margins (NIM) widen. NIM is the spread between banks’ (higher) lending rates and (lower) savings rates. And a higher NIM translates into more net interest income, boosting bank profits. Hence, Lloyds will be quick to pass on rate rises to UK borrowers, not least to support its share price.

2. Sustained mortgage growth

Good, old-fashioned lending growth could boost Lloyds’ earnings. As the UK’s market leader in mortgages, Lloyds’ fortunes are strongly tied to the housing market. And with UK house prices surging in 2021, mortgage lending is back in rude health. However, many of the cheapest mortgage deals have already been withdrawn or repriced higher. Also, tracker mortgage rates will creep up in line with Bank rate rises. So higher mortgage rates means more interest income, helping to support the Lloyds share price.

3. Growth in consumer credit

For two years, there has been negative or negligible growth in consumer credit like loans and credit cards. But recently there have been  signs of a tentative recovery in consumer demand for credit. This good news for Lloyds, which is #2 in UK credit cards and a major provider of personal loans. Lloyds has links to 14m households and 30m customers, so strong growth in consumer spending and borrowing should be positive for the Lloyds share price.

4. Rising corporate earnings

Thanks to massive government support, British businesses have ridden out the Covid-19 storm fairly well. But if UK economic growth picks up, this could lift corporate earnings. And as company profits and business optimism rise, firms might be keener to borrow. This would be beneficial to Lloyds, which has a market share of 19% of lending to small and mid-sized British businesses.

5. Share dividends and buybacks

Finally, Lloyds may have £4bn and more in excess capital on its balance sheet. With the banking regulator’s permission, it could boost future cash dividends. Lloyds cancelled these payments in spring 2020, but resumed in May 2021. Also, its spare capital could be used to fund share buybacks. And higher dividends and buybacks can strongly support and boost share prices.

I don’t own Lloyds stock today, but I’d buy at the current share price. To me, LLOY looks cheap on fundamentals. However, Lloyds 2022 results could suffer from a lack of loan write-backs, which strongly boosted its bottom line last year. Also, the bank’s move to become a major domestic landlord increases its exposure to house prices. Finally, the shares could take a real beating if coronavirus turns nasty again!

Cliffdarcy 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.