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Lloyds Share Plunge To Nine-Year Lows on Banking Scandal and Lockdown Speculation

lloyds share price

Lloyds share plunge to the lowest level since December 19, 2011, on reports of a banking scandal that rattles the sector across the globe. Meanwhile, speculation on a two-week lockdown in the U.K. also weighs on the stock. New coronavirus infections are rising by 6,000 daily while hospital admissions are rising sharply. Further restrictive measures or a lockdown would cancel the recent economic recovery in the U.K.  The banks and the FTSE 100 slumps on banking scandal.

The situation gets worse on reports that several global banks such as JP Morgan, Deutsche Bank, HSBC, Standard Chartered and Bank of New York Mellon moved large sums of funds for two decades from clients they suspected of money laundering. The reports referred to the suspicious activity reports (SAR) filed by the banks to the U.S. Treasury. Most of the banks denied the allegations and said that they had invested substantially in the fight against the money laundering.

Lloyds Performance Hit By Low-Interest Rates

After a weak performance in the 2Q, the banking group announced job cuts of 865 staff in the wealth management and insurance sector in an attempt to reduce the operating costs. Lloyds reported that the Net Income drop 11% to £5.4 billion, and the Operating costs declined by 6.5%. Lloyds provisions rose to £2.4 billion, up from £1.4 billion in the first quarter of the year, and £579 million the 2Q in 2019. 

The Bank of England statement after the bank’s monetary policy decision the previous week sparked speculation for negative interest rates as the bank said that discussed the impact of negative interest rates in the U.K. economy. Low-interest rates environment had narrowed the Net Interest Margin for Lloyds down to 2.40% from 2.89% in 2019. The net interest income fell to £5.5 billion an 11% drop, while the further reduction in interest rates will have further negative implications in the Banks balance sheet. 

Lloyds Share Technical Analysis

Lloyds share drops to nine-year lows as it gives up 5.91% at 23.72as the correction accelerates after the stock price breached below the July 31 lows. The technical outlook is clearly bearish, and lower levels are on the cards. A short rebound can’t be ruled out as the RSI index is in oversold territory. Most likely that kind of rebound would be short-lived and might provide a selling opportunity. 

Support for Lloyds share stands at 23.64 the daily low. Next support area is at 22,83 the low from December 19, 2011. A break below 22.83. would pave the way for 21.70 the low from November 21, 2011. 

On the upside, first resistance stands at 25.05 the daily high. More sellers would emerge at 26.48 the top from September 18. What can cancel the bearish momentum is a move above the 50-day moving average at 28.11. 

Lloyds Share Daily Chart