Lloyds share price has been in a consolidation phase in the past few weeks as investors waited for the next catalyst. The shares are trading at 42.56p, where it has been in the past few days. This price is about 10% above the lowest level in October of this year. The stock has dropped by 10% this year, meaning that it has outperformed the SPDR Bank ETF (KBE), which has dropped by 17% YTD.
Lloyds Bank challenges
Lloyds share price has struggled in the past few months as growth in the UK slows. It has also lagged because of the performance of the real estate sector. Data published this week showed that UK house prices plunged in October. Prices fell at the fastest pace since February 2021, with the average price falling to 292,598 pounds.
House prices have an impact on Lloyds, a company that seeks to become the biggest landlord in the UK. At the same time, the company is the biggest mortgage lender in the UK. Therefore, with house prices falling, there is a likelihood that the firm’s earnings will be hit.
On the positive side, Lloyds Bank is benefiting from the relatively high-interest rates. The most recent earnings showed that its statutory profit after tax for the nine months rose to £4 billion. Its net income rose by 12% to £13 billion while the underlying profit before impairment rose to £6.5 billion.
The company’s customer deposits rose to £484 million while its loans and advances to customers rose to £456 billion. In its statement, the company said that it expects its net interest margin to be over 290 basis points. It hopes that its operating costs will rise to £8.8 billion while its Return on Tangible Equity (ROTE) will be 13%.
Is LLOY a good investment?
So, is Lloyds a good investment? Lloyds Bank is a good British franchise that owns some of the best brands in the industry. However, the stock has been a terrible investment in the past few years.
For example, it has fallen by more than 23% in the past five years and by 37% from its highest point in 2019. It has also crashed by over 80% from its 2009 high. Therefore, while past performance is not a predictor of future performance, it is relatively difficult to recommend it as an investment.
Analysts have mixed opinions of the stock. Those at Barclays recently downgraded their outlook for Lloyds to 70p. Analysts at Deutsche Bank and Berenberg reiterated their bullish view.
Lloyds share price forecast
The four-hour chart shows that the LLOY share price has been in a tight range in the past few days. It has formed a symmetrical triangle pattern that is shown in green. The stock is also consolidating at the 50-day moving average while the MACD has moved to the neutral level.
Therefore, I suspect that the stock will have a bearish breakout as sellers target the key support at 40p. A move above the resistance at 44p will invalidate the bearish view.
