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Lloyds share price forms a dreaded pattern ahead of earnings

By: Invezz

Lloyds (LON: LLOY) share price is sitting at an important level ahead of the company’s financial results. The stock is nearing the year-to-date high of 52.35p, its highest point this year as the FTSE 100 index has jumped to a record high.

Lloyds Bank earnings ahead

This will be an important week for Lloyds Bank as the company publish its quarterly financial results on Wednesday.

These results will come at a time when the company’s stock is doing significantly well. It has soared by more than 35% from its lowest level in November. It has joined other European banks like Unicredit, Barclays, and HSBC that have jumped sharply this year.

The company has benefited from the relatively high interest rates in the UK. Rates in the country have jumped to a multi-year high of 5.25%, leading to strong net interest income (NII).

The most recent financial results showed that its total revenue in the quarter to over £5.3 billion in the last quarter. Its net income came in at £1.2 billion during the quarter as its net interest margin jumped.

Looking ahead, analysts now expect this week’s results to show that its net interest income retreated to £3.2 billion, down from £3.5 billion in the same quarter in 2023. Net income is expected to drop to $4.32 billion from last year’s £4.6 billion.

Lloyds earnings estimates

Analysts also expect that its CET1 ratio dropped from 14.1% in Q1’23 to 13.9%. Most European banks have been reducing their CET1 ratios as they boost their returns to investors and narrow their price-to-book ratio. It expects to reduce its ratio to fall to 13% by 2026. The bank has a P/B to ratio of 0.6640, meaning that it is below its book value. 

Lloyds share price forecast

LLOY chart by TradingView

Turning to the daily chart, we see that the Lloyds Bank stock price has been in a strong bullish trend after bottoming at 38p in October last year to a high of 52.35p this month. It has remained above the 50-day and 25-day moving averages.

The stock seems to be forming a double-top pattern at 52.34p whose neckline is at 49.43p. In most cases, a double-top pattern is usually a bearish sign. The Relative Strength Index (RSI) and the MACD indicators have formed bearish divergence patterns.

Therefore, the outlook for the stock is neutral with a bearish bias. A move above the crucial resistance point of 52.34p will point to more upside. However, because of the double-top pattern and the divergence patterns, there is a likelihood that it will have a bearish breakout to the neckline at 49.43p.

The post Lloyds share price forms a dreaded pattern ahead of earnings appeared first on Invezz

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