Lloyds Bank shares have stabilized this week as investors wait for its closely watched earnings report, which will shed light on its performance. It was trading at 102.60p on Wednesday, up modestly from this month’s low of 99.46p.
Lloyds Bank to react to UK budget
The next few days will be important for Lloyds as investors will react to several important events. The most immediate event will come from London, where Chancellor John Healey will deliver his budget.
Analysts expect that he will raid banks, which have benefited from a prolonged period of higher interest rates. The expectation is that he will raise the sector-specific surcharge on banks profits to 8% from the current 3%. This will mark a big reversal from what Rishi Sunak did when he lowered it from 8% to 3% in 2023. The government hopes to raise an additional 2 billion pounds a year.
In a statement, Charlie Nunn, the CEO, said that it will cost the bank up to 200 million pounds. He added that the bank can withstand the surcharge, saying:
“None of that would change my guidance, and I don’t think it would change the investments and the strategy we’ve got in place.”
Lloyds Bank earnings report
The next important catalyst for the stock will be its earnings report. Analysts expect the results to show that its net interest income rose to £3.8 billion in the third quarter, while its other income moved to £1.69 billion. Its profit for the period is expected to come in at £1.66 billion, with its net interest margin rising to 3.26%.
The expectation is that its business did well because of the relatively high interest rates and the fact that it has largely handled the motor insurance crisis.
UK banks have released mixed earnings. Barclays stock fell after its earnings report disappointed because of the ongoing challenges in the investment banking industry. HSBC stock droppedafter its earnings on Tuesday, while Standard Chartered rose after its strong revenues and guidance.
Bank of England interest rate decision
The other key catalyst for the stock is the upcoming Bank of England interest rate decision on Thursday next week. Economists expect the bank to hike interest rates by 0.25% as it battles the elevated inflation in the country.
Recent economic numbers support higher interest rates in the UK. The data showed that the economy grew at a healthy pace in August, while inflation remained stubbornly high. Also, the labor market has done well, a sign that the economy is improving.
Lloyds share price technical analysis
LLOY stock chart | Source: TradingView
The daily chart shows that the LLOY stock formed a double-bottom pattern at 99.46 and a neckline at 108.05p. This pattern is usually one of the most common bullish reversal signs in technical analysis.
The stock remains below the 100-day and 200-day Exponential Moving Averages (EMA) and the Supertrend indicators. Therefore, the most likely scenario is where it rebounds after its earnings report on Thursday. If this happens, it may retest the neckline at 108p. A drop below the support of 99.46p will invalidate the bullish outlook.
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