The Lloyds share price is up 30% since hitting lows below 24p in October 2020. It’s been quite a recovery, one that the Lloyds Banking Group will hope can continue as it prepares to release its full-year results.
With the Covid-19 pandemic and uncertainty over the true impact of Brexit hitting UK banks hard over the last 12 months, there’s not expected to be much to cheer in the numbers. As the biggest lender in the country, Lloyds' share price is something of a bellwether for the sector, so there will be keen focus on the results after this tumultuous year.
Lloyds share price hit by lockdowns
Lloyds full-year results are expected to have been hampered by the impact of Covid-19, and the lockdowns across the UK.
The bank had reported a first-half loss of £602m, after it increased its loan-loss provisions by £300m to £4.1bn for the first nine months of the year. These provisions were less than expected, and the lowering of its loan-loss provision estimate in Q3 may have been a little premature given the tightening of restrictions that took place in November and December, and which have remained in place this year.
Encouragingly, the bank was able to report a statutory Q3 pre-tax profit of just over £1bn, while also revising its estimate for full-year loan losses to the lower end of a £4.5bn to £5.5bn range.
The net interest margin was weaker, slipping from 2 79% to 2.4%, and a further deterioration could impact profit in Q4, however the recent steepening in UK yields may offset some of that possible weakness.
Lloyds beset by uncertainty
The outlook seems highly uncertain, given that a lot more of its customers are likely to find themselves in further financial difficulty in the months ahead. With the furlough period still set to come to an end, more job losses are expected. Lloyds will have to continue to adapt to the situation.
In its Q3 numbers, the bank outlined how many payment holidays were granted as a result of the first lockdown. On mortgages that number came in at around 477,000, equating to customer balances of £62.7bn, as well as 320,000 payment holidays on credit card balances. A large majority of these payment holidays have matured, with 83% of the mortgage holidays resuming payments, and 13% extended. The recent lockdown is likely to see these numbers edge up again, and the worry is that the recent improvement in Lloyds' share price is down the good news that has been carried forward from the previous quarter.
CEO out, dividend back in
Wednesday's full-year numbers will be the last reported with Antonio Horta-Orsorio at the helm, with the Portuguese set to leave the hot seat later this year. After 10 years leading Lloyds, Horta-Orsorio will be replaced by Charlie Nunn, but may leave a small gift as he prepares to depart, with the dividend set to return.
A 1p shareholder dividend is expected to be back on the table, after such payouts were effectively banned by the Prudential Regulatory Authority last year. There are still limits, and dividends must be paid out of earned profit if they are to be reinstated.
Lloyds Banking Group will reveal its latest results on Wednesday 24 February at 7am. What will the impact be on the Lloyds share price?
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