Lloyds share price has been in a slow recovery phase in the past few weeks as FTSE 100 rebounds. The stock was trading at 44p, which was about 13% above the lowest level in October. This price is the highest it has been since October 10 of this year. Other banking stocks like Goldman Sachs, Barclays, and NatWest have also risen.
Is LLOY a good buy?
Lloyds Bank is a major British banking group that serves over 26 million customers in the UK. The firm operates under its eponymous brands and others like Halifax and Bank of Scotland. Lloyds has one of the best balance sheets in Europe with a core tier one ratio of 15.6%. Only two other European banks have a tier 1 ratio of 15: Unicredit and ABN Amro Bank.
Lloyds Bank is also a relatively cheap bank, with a price-to-book ratio of 0.6. In contrast, banks like UBS, Caixabank, and HSBC have a ratio of over 0.7. However, Lloyds Bank share price has underperformed in the past few months.
A key risk for the Lloyds share price is the housing market. Lloyds is the biggest mortgage company in the UK. It is also implementing a plan that will see it become the biggest landlord in the country. Now, with home prices falling and with mortgage rates rising, there are worries that the company will be exposed.
Asking prices for British homes dropped by 1.1% or 4,159 pounds. Average two- and five-year rate mortgages rose to 6% in October for the first time since 2008. This trend will continue as the Bank of England (BOE) continues its rate hikes.
High mortgage rates are positive for Lloyds Bank since it makes more money. However, there are also risks of more default and a crash of home prices. In its most recent quarter, the company said that its net interest income rose by 15% to £9.5 billion while its other income rose by just 2% to £3.8 billion. Iys net income rose by 12% to £13 billion.
Lloyds share price forecast
The four-hour chart shows that the LLOY stock price has been in a slow recovery pace in the past few days. It has moved slightly above the symmetrical triangle pattern shown in green. The stock has also moved above the 25-day and 50-day moving averages. At the same time, the Relative Strength Index (RSI) continued rising.
Therefore, from a technical standpoint, the stock will likely continue rising as buyers target the key resistance level at 46.94p. This was the highest level on October 5. A drop below the support at 43p will invalidate the bullish view.