Lloyds share price is firing on all cylinders as the countdown to its fourth-quarter and annual earnings report continue. LLOY has risen in the last five straight weeks and is hovering at its highest level since 2008. So, is it a good bank stock to buy this month?
Lloyds Bank has done well recently
Lloyds is the biggest domestic banking group in the UK, where it serves over 26 million customers. Its business is relatively different from Barclays, mainly focusing on consumer and business lending across all its business lines. Its other businesses are Halifax, Bank of Scotland, and Scottish Widows.
Lloyds stock continued its rebound on Thursday after the company published strong financial results that bode well for other British banks. Barclays’ net profit jumped by over 24% in the fourth quarter, helped by its trading division. These numbers mean that Lloyds likely did well too.
Lloyds Bank will publish its results on February 20th, and analysts anticipate that its business did well. The consensus view is that Lloyds Bank’s net interest income (NII) will be £3.24 billion, slightly higher than the £3.23 billion it made in the second quarter. The annual NII is expected to be £13.76 billion.
British banks have done well in the past few years, helped by the Bank of England’s higher interest rates. The Bank hiked interest rates from near zero during the pandemic to about 5.25%, which leads to a higher net income margin.
The challenge, however, is that the higher rates lead to cash outflows from banks into money market funds, which offer a higher return. This explains why the net income margin growth has slowed.
LLOY earnings preview
Lloyds Bank’s net income is expected to be £4.346 billion, a slight drop from the £4.340 billion it made in Q2.
Analysts are optimistic that the company’s profitability will continue doing well in the coming years even as the Bank of England (BoE) slashes rates. The total annual net income will be £12.8 billion in 2024, £13.3 billion in 2025, and £14.43 billion and £15 billion in the net income.
A key challenge is that the company has an exposure to the motor vehicle insurance industry, that has faced some issues. Some analysts model that it will have an incremental provision of £550 million in the coming earnings.
The other bullish catalyst for the Lloyds share price is that the company is reducing its share count aggressively. It will announce a £1.69 billion share buyback next week. Its total share buybacks for the next few years will be worth over £10 billion, a move that will boost its earnings per share.
Lloyds share price analysis
The weekly chart reveals that the LLOY stock price has been in a strong bull run in the past few months. It has just crossed a key resistance level that was its highest swing since 2016. It had resisted moving above that level since 2016.
The stock has formed an ascending triangle pattern, a popular bullish sign. It also formed an inverse head and shoulders pattern and moved above the 50-week moving average.
Therefore, the stock will likely surge to the 50% Fibonacci Retracement level at 94p, up by 47% from the current level. The upcoming NatWest earnings will offer more information about the banking sector in the UK.
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