Lloyds share price has crashed into a correction, moving from the year-to-date high of 114.70p on February 4 to the current 100p. It is hovering near its lowest level since January 12, mirroring the performance of European banks like Barclays and UniCredit.
Lloyds stock dropped after its financial results
Lloyds Banking Group, the top British bank, announced strong financial results, continuing a trend that has been going on in the past few years. It has benefited from the rising interest rates, which have boosted its net interest margin.
At the same time, the company has benefited from the cost-cutting measures that have been helped by its investments in its digital capabilities. It has now saved over £1.9 billion since 2021.
Lloyds Bank has also benefited from the ongoing growth in its other income, including through acquisitions. For example, its underlying other income jumped to £6.12 billion in the fourth quarter from the previous £5.59 billion.
The results also revealed that its underlying net interest income jumped to £13.6 billion from the £12.8 billion it made in the same period a year earlier. Combined, the net income jumped to £18 billion, while the statutory profit after tax soared to £4.75 billion.
The profitability was impacted by a £968 million remediation charge, with most of them being related to the motor finance commission agreement. On the positive side, there are signs that the company is nearing the end of this remediation.
Lloyds Bank’s management believes that the growth trajectory will continue this year, with the underlying net interest income coming in at £14.9 billion.
City analysts also expect the growth will likely continue accelerating in the coming years. A report compiled by Lloyds Bank shows that its net income will rise to £20.1 billion this year, followed by £21.56 billion and £22.68 billion in the next two financial years.
The annual profit is expected to keep rising in the coming years, moving from £6.15 billion this year, followed by £7 billion in 2027 and £7.5 billion in 2028. Historically, Lloyds Bank often does better than estimates, meaning that the trend may continue in the coming years.
Lloyds Bank has continued to reward its shareholders through dividends and buybacks. It increased its dividend payouts by 15% to £1.75 billion, while its CET1 ratio fell to 13.2%.
Lloyds share price technical analysis
The daily timeframe chart shows that the LLOY stock price has come under pressure in the past few weeks, moving from the year-to-date high of 114.65p on February 4 to the current 101.15p.
On the positive side, the stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are still in control and that this retreat is a simple retracement. It has also remained above the 100-day EMA.
The stock has also formed a harami candlestick pattern, which is made up of a small bullish candle that comes after a big bearish candle. It is a common bullish reversal candlestick pattern.
Therefore, the stock will likely bounce back in the coming days, potentially to the year-to-date high of 114.65p, which is up by 12% above the current level. A drop below the key support level at 98.10p will invalidate the bullish outlook.
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