Lloyds share price is hovering at its highest level in over 17 years as the British bank’s performance continues doing well. It was trading at 72p on Thursday after publishing its first-quarter results, which revealed that its lending performed well despite signs of weakening in the economy.
Lloyds Bank had a strong first quarter
The UK’s economic growth has largely stalled over the past few years, as it continues to lack a clear catalyst and high interest rates take their toll. It is estimated that the economy grew by just 0.3% in the first quarter, helped by the services sector.
Lloyds Bank is often seen as a good barometer for the British economy as it is the biggest lender in the country. It serves over 26 million customers and thousands of businesses across the country.
The financial results published on Thursday showed that its net interest income rose by 3% to £3.29 billion. This increase happened as UK interest rates remained high and as homebuyers rushed to beat a stamp duty increase. It let out to 20,000 first-time buyers, higher than what it did in a while. This pushed its loans and advances to customers rose by 6% to £466.2 billion.
The other income rose by 8% to £1.45 billion. This resulted in a net income of £4.3 billion, representing a 4% annualized increase. Its underlying profit was £1.53 billion, while the statutory after tax profit dropped by 7% to £1.3 billion.
Read more: Lloyds share price outlook ahead of earnings: buy, sell, hold?
LLOY reports a big impairment charge
The net profit narrowed because the company took and impairment charge of £309 million, higher than what analysts were expecting. On the positive side, the company did not bring any charges related to its motor insurance crisis this time. In a statement, the CEO said:
“Our differentiated business model stands out in the context of recent market volatility and economic uncertainty and helps support UK households and businesses as they further strengthen their financial resilience.”
Lloyds Bank hopes to have a net interest income of £13.5 billion this year and a Return on Tangible Equity (RoTE) of 13.5%. It hopes to continue growing its RoTE to over 15% next year.
Lloyds Bank has a dividend yield of 4.02%, higher than the average one of the FTSE 100 Index. This explains why many investors, especially those focused on income, have piled into Lloyds. In fact, it is the most held stock in the UK with over 2.7 million shareholders.
The company hopes to continue paying its dividends and repurchasing its stock this year as it works towards reducing its CET-1 ratio from 13.5% to 13%.
Lloyds share price analysis
The daily chart shows that the Lloyds share price has been in a steady increase in the past few weeks. It initially crashed to a low of 58.72p as the tariff crisis escalated. This was in line with our previous LLOY forecast. It then rebounded swiftly and now sits at 72p.
The stock has formed an inverse head-and-shoulders pattern, a popular bullish continuation sign. Its neckline is slanted and is at around 74p. It also remains above the 50-day and 100-day moving averages.
Therefore, the inverse H&S pattern points to a strong bullish rally in the next few months. The initial target will be at the psychological point at 80p, with the most extreme situation being a surge to 100p. That would mean a 40% surge from the current level.
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