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Every time Lloyds‘ (LSE:LLOY) shares fall, I see investor forums full of the same anxious question: should I sell before it gets worse?
The worry’s understandable. The bank faces an Autumn Budget (28 October) that could bring changes to sector taxation, followed by its third-quarter results (29 October). Add concerns over deposit competition and pressure on lending margins, and it’s little wonder some holders are nervous.
But when everyone rushes for the exit, it’s worth keeping a steady head and asking what’s really going on. That takes us to billionaire investor Warren Buffett.
What Buffett teaches us during a sell-off
Buffett isn’t the type of stock picker I’d copy blindly, but his timeless wisdom is always useful. One of his most famous quotes apply here:
“Be fearful when others are greedy, and be greedy when others are fearful.”
During the 2008 financial crisis, Buffett publicly said he was buying US stocks while many investors feared the financial system was breaking. In his New York Times article ‘Buy American. I Am’, he wrote:
“Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”
The important nuance is that Buffett wasn’t telling people to buy anything specific. Simply, to buy businesses that you understood, at prices you considered attractive, with a long-term horizon.
That distinction matters. A falling share price isn’t automatically a buying signal – more a prompt to reassess the business. So does Lloyds pass a Buffett-style test?
A simple checklist for Lloyds
Is the business understandable? Yes. Lloyds is a large UK retail and commercial bank, with lending, deposits and everyday banking at its core.
Is it returning capital? Yes. The board raised the 2026 interim dividend 30% to 1.58p per share, worth £918m, and announced an interim buyback of up to £1bn.
Is the earnings story intact? Partly. Underlying net interest income was £7.3bn in the first half, up 9% year on year, and management still expects 2026 underlying net interest income to be greater than £14.9bn. Return on tangible equity (RoTE) was 17.1% in the half.
| Metric | Value |
|---|---|
| Interim dividend | 1.58p (up 30%) |
| Share buyback | £1bn |
| Net interest income | £7.3bn (up 9%) |
| RoTE | 17.1% |
That’s a solid starting point but there are still several deeper issues worth taking into account. Banks are sensitive to credit cycles, regulation and margin pressure. If deposit costs rise faster than lending income, or if the economy weakens and bad debts increase, the outlook can deteriorate quickly.
The question now is whether the third-quarter results support the bank’s confidence – or expose cracks beneath the headline capital returns?
The lesson for nervous investors
Lloyds isn’t risk-free, and Autumn Budget surprises or weaker results could send the shares lower. But panic-selling without checking the fundamentals isn’t a strategy, it’s a knee-jerk reaction.
Market crashes don’t create good investors. They reveal whether investors had a plan before the panic started.
For now, Lloyds remains a Hold for my portfolio. And if it falls further, I won’t automatically follow the crowd out of the door. I’ll check whether the business still deserves my money and whether I think it’s worth the consideration of other investors.
Should you invest £5,000 in Lloyds Banking Group Plc right now?
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Mark Hartley owns shares in Lloyds Banking Group.
This story originally appeared on Motley Fool
