Lloyds share price analysis ahead of Q3 earnings and BoE rate hike
Lloyds share price has lost momentum in the second half of the year, moving from a high of 117.80p in July to the current 101.85p. This retreat has coincided with the ongoing selling of European banks, with focus now turning to its upcoming earnings report.
Lloyds Bank to publish its quarterly earnings report
Lloyds share price wavered as Barclays, a top peer, published its financial results. Barclays said that its total income rose by 8% in the first half of the year to £23.86 billion. Its quarterly revenue rose to £7.36 billion, up by 3% from the same period last year. Its profit continued rising during the quarter.
In most cases, Barclays’ earnings tend to act as a barometer of what other UK banks will report. However, the two banks are usually very different since Barclays is an international business with a presence in the investment banking division.
The consensus among analysts is that its net interest income will come in at £3.828 billion, with its other income being £1.69 billion. Its net income is expected to come in at £5.1 billion, bringing the year-to-date level to £14.8 billion.
Analysts also expect the company’s net profit to be £1.6 billion, bringing its year-to-date figure to £4.78 billion. Modelling suggests that the company’s revenue growth will continue rising in the coming years. For example, the consensus for the year is that its net income is £20 billion, followed by £21.9 billion, £23.3 billion, and £24.6 billion in the following years.
UK economy is doing well as odds of BoE rate hike jump
Fundamentals suggest that Lloyds Bank will likely continue doing well, supported by the health of the UK economy. Data released this month showed that the unemployment rate dropped to 4.1% last month, while the economy added over 100,000 jobs in the three months to August.
Another report released last week showed that the economy rose by 0.1% in August, higher than expected. It grew by 2.1% on an annual basis driven by the ongoing artificial intelligence boom in the country.
The main challenge, however, is that inflation has remained stubbornly high. The headline consumer price index jumped last month and moved further away from the bank’s target of 2%.
These numbers mean that the Bank of England (BoE) will likely hike interest rates in the next meeting. Odds of the bank hiking have jumped to 90%, which will benefit banks in expanding their net interest margin.
Lloyds share price technical analysis
LLOY stock chart | Source: TradingView
The daily chart shows that the LLOY stock price has retreated sharply in the past few weeks. It has dropped from a high of 117.80p in July to the current 101.40p.
The stock has moved below the ascending trendline that links the lowest swings in March, May, and June this year. Moving below that level confirmed the bearish outlook.
Lloyds Bank stock has also moved below the 50-day Exponential Moving Average (EMA) and the Supertrend indicator. The Relative Strength Index (RSI) has formed a descending channel.
Therefore, the stock will likely remain under pressure, potentially to the key support level of 95p. A move above the 106.90p will invalidate the bearish outlook.
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