The Lloyds share price is up in today’s trading session, continuing its long-term bullish trend that has seen its value surge by almost 20 percent since mid-October. Today’s price gain also follows a recent price correction that had resulted in the company’s value falling by 5 percent in December.
Is it Time to Buy Lloyds?
Lloyds Banking Group is a major player in the UK banking sector and its share price has been a subject of discussion among analysts and investors. While some believe that the stock is attractive and has upside potential in 2023, others are more skeptical and see significant risks to the company’s profits.
One positive factor cited in support of Lloyds is its strong balance sheet, with a CET1 ratio of 15% and liquidity coverage ratio of 146%. This suggests that the bank has a strong foundation and is well-positioned to weather any potential economic challenges. Additionally, the bank is expected to benefit from the recent interest rate hikes by the Bank of England, as higher rates boost the margin between the rates banks offer to borrowers and to savers.
However, there are also concerns about the outlook for the UK economy and the impact this could have on Lloyds. Some analysts predict a recession lasting until the end of next year, with KPMG expecting a meagre 0.2% GDP rise in 2024. This could pose a particular risk to Lloyds, given its focus on UK retail banking and narrow geographic focus. There is also the threat of competition from digital banks, which have seen revenues grow at a compound annual rate of 750% between 2018 and 2021.
Based on the above information, it is highly likely that we might continue to see Lloyds share price grow due to attractive features such as the low price-to-earnings ratio and high dividend yield. In my opinion, the current risks, though significant, are not likely to impact the bullish trajectory the company is on currently. Therefore, there is a high likelihood that we might see the Lloyds share price trading above the 50p price level in the next few trading sessions. A drop below 42p price level will invalidate my bullish analysis.