A number of quick months in the past, the Lloyds (LSE: LLOY) share price was bouncing fortunately alongside and I used to be feeling happy with myself.

Happy as a result of I’d purchased Lloyds shares simply earlier than they began to recuperate. Happy as a result of I used to be up about 45% briefly order. And happy that this was each one in every of my largest holdings and finest performers. I noticed that as a contented synergy. I used to be additionally happy with the dividends I had began to reinvest again into the inventory. Happy, happy, happy.

I used to be additionally relieved, as a result of traders appeared to have dismissed ideas that the motor finance mis-selling scandal can be the following PPI scandal. That nightmare value Lloyds greater than £23bn in compensation, in addition to a heap of reputational injury.

I believe this blue-chip financial institution has been oversold

The board had put aside £450m for motor finance mis-selling, which urged it wasn’t too anxious. However I used to be. Lloyds holds about £15bn in automotive loans by means of its Black Horse division, greater than some other.

As a private finance journalist, I’ve reported on this sort of scandal earlier than, they usually have a behavior of spiralling. Particularly with cash saving skilled Martin Lewis whipping issues up.

Issues nonetheless regarded set honest when Lloyds posted a stable set of Q3 outcomes on 23 October. Whereas statutory income fell 2% yr on yr to £1.82bn, they nonetheless beat consensus forecasts of £1.6bn. CEO Charlie Nunn reaffirmed 2024 steerage.

Then on 28 October, Lloyds up to date the market on latest Courtroom of Enchantment rulings on motor fee preparations, and markets lastly took fright. It mentioned judges had dominated that lenders have been additionally accountable for any non-disclosures by sellers. Fears that the scandal may value Lloyds £1.5bn all of the sudden got here into sharper focus. Lloyds refuses to place a price on the potential value, additional spooking markets.

We nonetheless don’t know concerning the scandal

Its shares trailed however as we speak they’ve all of the sudden jumped 3.06% after the Supreme Courtroom agreed that Shut Brothers, which has even higher publicity than Lloyds relative to its dimension, may attraction the motor finance fee ruling. Hope is within the air once more.

Right this moment, Lloyds shares look sensible worth with a price-to-earnings ratio of simply 6.97%. If the motor finance scandal is settled at a modest value, they may recuperate a few of their misplaced worth briefly order. So ought to I purchase extra?

Whereas I’m happy by as we speak’s soar, I received’t purchase extra. I don’t prefer to gamble on the result of court docket instances. So I received’t prime up my Lloyd shares as we speak. As for my present stake, I’ll proceed to comply with my authentic plan and grasp onto them. I haven’t for a second thought-about promoting.

Lloyds shares have struggled in latest months however that’s neither right here nor there, provided that I plan to carry them for years and ideally many years. They’ll bounce again in some unspecified time in the future. And whereas I wait, my reinvested dividends may decide up extra inventory on the decrease price.