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Lloyds’ share price: earnings preview

Lloyds’ [LLOY] share price is having a solid run as it continues to rebound from the worst of the pandemic. The stock is up just over 6% (through 22 October) in the past three months, outpacing the FTSE 100’s 2.32% gain in the same period. And while that pales next to Barclays’ [BARC] 18% surge over the period, investors should be more than happy with Lloyds’ performance.

With analysts increasingly backing UK banks ahead of a prospective interest rate hike, now could be the time to back the UK’s biggest bank.

 


What’s happening with Lloyds share price?

Lloyds’ share price is now trading just below the 52 week high of 52.06p that it hit last May.  One question on investors' lips will be whether the stock can once again climb to its pre-pandemic levels.

At the start of 2020, Lloyds’ share price was trading north of 60p a share. Then, of course, the pandemic hit and by the end of March 2020, the stock was trading at 27.7p. That marked the start of a prolonged slump in Lloyds’ share price as the bank scrapped the dividend, stashed cash to safeguard against a potential rise in loan defaults, and the economic outlook darkened as talks of a double-dip recession did the rounds.

The slump also meant a buying opportunity for anyone betting on a rebound in the UK banks. And since 21 September - when Lloyds share price hit 24.55p in intraday trading - the stock has rebounded 97.11%.

97.11%

Lloyd's share price rebound since 21 September

 

 

Analysts back Lloyds share price going into earnings

Given Lloyds’ share price gains, is there any upside left in the stock? Credit Suisse thinks so having recently described the stock as ‘good value’, reports Proactive Investor.

Credit Suisse reckons that concerns over the UK mortgage market and the lack of a buyback have put undue pressure on the stock. With an interest hike from the Bank of England expected this year, some providers have already started to pull their cheapest mortgages off of the market, while banks will inevitably start to raise the price of their fixed rate products.

Yet the Swiss bank thinks that Lloyds’ upcoming results should reassure investors over the mortgage situation, while a buyback could be on the cards when full-year numbers come out.

Separately, analysts at Credit Suisse suggest that the expected hike in the base rate will be good news for UK banks and have increased their 2022 to 2024 EPS forecasts, with Lloyds and NatWest [NWG] picked out as the biggest beneficiaries. Should a rate hike come before Christmas, Lloyds could see its net income grow by as much as 15%, according to Interactive Investor.

Continuing the narrative of a good value stock, UBS analyst Jason Napier has a 55p price target on Lloyds, arguing that the stock is ‘attractively valued’ right now. Hitting Napier’s target would see a 12.9% upside on Friday’s close of 48.73p.

 

 

 


Where next?

Lloyds reported a net income of £3.9bn in the second quarter 2021, up from £3.46bn in the same quarter the previous year. Underlying profit came in at £1.99bn, up from a loss of £839m last year.

Despite the robust numbers, Lloyds’ share price actually dipped the day the results came out. Having examined the results in July, a seemingly perplexed Deutsche Bank increased its 2020 profit target for the bank and upped its price target to 57p - a near 17% upside. This time out Lloyds’ share price could bounce if it underlines its position of strength and continues to rebound from the effects of the pandemic.

Among the analysts tracking Lloyds share price on Yahoo Finance, Lloyds share price carries a 54.74p price target, suggesting a 12.3% upside on Friday’s close.

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