Lloyds share price is down by more than 0.75% today, becoming one of the worst-performing banking stocks in the FTSE 100. The shares, which are the most heavily-traded in Hargreaves Lansdown, are trading at 35.33p, which is slightly below yesterday’s high of 36.33p. Other banks like Barclays, HSBC, NatWest, and Standard Chartered are also in the red.
Lloyds shares have dropped today as bulls take a breather following a strong rally that started on Tuesday last week when they were trading at 27.22. This means that the shares have climbed by almost 30% in the past few days. Still, the shares have declined by more than 43% this year.
For starters, Lloyds is the biggest retail bank in the United Kingdom with a market cap of more than £24 billion. HSBC bank, which has a market value of more than £77 billion is bigger, simply because of its international operations.
Lloyds is mostly a national bank that operates through its Lloyds Bank, Bank of Scotland, Halifax, MBNA, Schroders Personal Wealth, and Scottish Widows brands. This makes it the biggest mortgage lender in the country, and a key beneficiary of the robust housing sector.
Why Lloyds (LLOY) stock has rallied
Indeed, in the most recent quarter, the bank said that its mortgage lending business increased by £3.5 billion as the number of applications rose to the highest level in more than a decade. Like all other banks, it allocated more than £301 million to cover potential bad debt, bringing the total to £4.1 billion.
Lloyds shares have also risen because of the rising odds of a Brexit deal. As talks go on this week, most analysts believe that the UK and the EU will each make concessions in a bid to create a deal. Such a deal will be positive for most companies in the UK, including Lloyds.
Still, while Lloyds Bank shares are cheap, there are key risks. For one, England is now in a lockdown as the number of coronavirus cases continue rising. The implication is that the new wave will lead to a slowdown of the bank’s business and more provisions for bad debt.
While the UK has already secured millions of doses of Covid vaccine, the logistics of their distribution means that the shots could take months to be distributed. So, what next for Lloyds shares?
Lloyds Bank share price forecast
On the daily chart, we see that Lloyds shares bottomed at 23.61p on September 22. Since then, the shares have risen by almost 50% to the current level of 35.40. The shares have moved above the 50-day and 100-day exponential moving averages and the resistance at 30.00p, which is further evidence that bulls are still in control.
Therefore, in the next few months, I suspect that the shares will continue rising, but bulls will need to move above 38.15p, which is the June 8 high. If that happens, the next stop for the shares will be about 40p, which implies another 13% upside from the current price. This bullish prediction will be invalidated if the shares move below 30p.
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Lloyds share price chart
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