The Lloyds share price has rebounded this year after dropping to a multi-year low in 2020. LLOY is trading at 41.47p, which is 75% above the lowest level in 2020.
What happened: Like all banks, Lloyds Group suffered greatly during the pandemic as the rising unemployment rate led to record defaults. The company was forced to set aside billions of pounds in reserves as the pandemic spread. It also suspended its dividends at the request of the Bank of England (BOE).
The lingering fear of negative interest rates also remained. Lloyds was greatly affected since, unlike Barclays, it does not have a trading business that benefited during the pandemic.
This year, however, several positive factors have propelled the Lloyds stock higher. First, the ongoing vaccination drive means that the economy will continue recovering. Second, the Brexit deal means that large disruptions were avoided. Third, the Bank of England (BOE) has hinted that it will not slash interest rates to the negative zone.
Another important factor is that the company has said that it will start returning funds to shareholders through buybacks and dividends. Further, the bank is sitting on a pile of cash because some of last year’s losses were mostly because of accounting standards. They had to pile the cash in anticipation of defaults.
However, not all the defaults happened, mostly because of the UK government furlough program. Therefore, there is a possibility that Lloyds will report strong earnings this year as it shifts some of the reserves into profits.
Lloyds share price forecast
A look at Lloyds stock shows that an important thing happened this month. The stock rose above 40.72, which is notable since it was the highest level since November 26. It has also formed a small ascending channel that is shown in black. Also, the price has moved between the middle and upper line of the Bollinger Bands.
It has also been forming a massive inverted head and shoulders pattern. Therefore, the stock may continue rising as bulls target the next key resistance at 50p, which is 50% above the current level. A drop below 35p will invalidate this trend.
LLOY stock price chart