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Lloyds share price and Q1 IMS preview


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What to expect and how to trade Lloyds’ upcoming interim management statement.

image.jpegSource: Bloomberg
 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 02 May 2023 

When are Lloyds’ results expected?

Lloyds Banking Group PLC, the United Kingdom-based financial services provider, is set to release its first quarter (Q1) 2023 interim management statement on 03 May 2023.

Lloyds’ shares shrug off banking worries

Like most banking stocks, Lloyds suffered heavily in March during the crisis around Silicon Valley Bank, Signature Bank and Credit Suisse.

The stock dropped from a post-pandemic high of 54.33 pence to a four-month low of 43.66p, before rebounding as fears of a wider banking crisis receded. While the share price dropped sharply in 2022, it has recovered all these losses, surging 40% from the October 2022 low to the February 2023 peak.

UK economy outlook crucial

As such a key player in the lending market for businesses and individuals, Lloyds is intimately linked with the outlook for the UK economy.

The good news is that, for now, a recession has yet to arrive. The winter is now past, and with it perhaps the worst for now for UK energy bills, giving homeowners and businesses more money to spend, though rising mortgage costs continue to hit spending.

But inflation continues at an elevated level, likely requiring further action from the Bank of England (BoE). Recent data showed double-digit Consumer Price Inflation (CPI) growth, along with strength in pay packets; as a result price growth will remain strong, pushing the BoE (however unwillingly) into raising rates to a fresh high.

Hopes of a cut in rates by year-end rest on a deterioration in economic data, but this supposed ‘bull case’ for the UK economy would also need to include skirting a recession, something that may not be achievable.

Low valuation supports share price

Crucially, Lloyds continues to trade on a lowly P/E ratio of around 7. This prices in much of the uncertain outlook, and provides some potential upside for the shares in the medium-term. Crucially, it also trades well below the FTSE 100’s P/E of 12.5.
This undemanding valuation does provide some hope for the shares to outperform, but of course much depends on whether the UK does hit a recession, either later this year or early in 2024.

How to trade Lloyds into the interim management statement

Refinitiv data shows a consensus analyst rating of ‘buy’ for Lloyds – 5 strong buy, 10 buy, 4 hold and 2 sell - with the median of estimates suggesting a long-term price target of 64.00 pence for the share, roughly 32% higher than the current price (as of 02 May 2023).

Refinitiv analyst recommendationsSource: Refinitiv

IG Group Holdings PLC sentiment data shows that 93% of clients with open positions on the share (as of 02 May 2023) expect the price to rise over the near term, while 7% of clients expect the price to fall whereas trading activity over this week and month shows 63% of sells.

IG client sentimentSource: IG

Lloyds – technical view

The recovery in the Lloyds share price from its March 46.73 pence banking crisis low is ongoing despite the recent drop in the oil price dragging the company’s share price lower, so far to its late April low at 47.245p.

While the next lower 200-day simple moving average (SMA) at 46.65p underpins on a daily chart closing basis, a resumption of the late March advance may ensue.

Lloyds Daily Chart

Lloyds Daily ChartSource: Tradingview

For the bulls to be back in control, however, a rise and daily chart close above the April high at 50.30p needs to be seen. In this case the February peak at 54.33p would be back in the frame, a rise above which would allow for the January 2022 peak at 56.00p to be back in play.

Lloyds Weekly Chart

Lloyds Weekly ChartSource: Tradingview

The medium-term uptrend, which began in October of last year, remains valid as long as no drop through the March low at 43.66p is seen.

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