How high can the Lloyds share price surge?
Lloyds Bank (LON: LLOY) share price continued its remarkable comeback this week after the latest UK inflation numbers dampened hopes of rate cuts. It is in its third consecutive week of gains and is hovering at its highest level since December 2019. It has surged by more than 184% from its lowest point in 2020.
Bank of England rate hikes
Lloyds and other British banks reacted positively to the latest UK inflation numbers. According to the Office of National Statistics (ONS), the headline Consumer Price Index (CPI) slipped from 3.2% in March to 2.3% in April. Core CPI, which excludes the volatile food and energy prices dropped from 4.2% to 3.9%.
This decline was less than the expected 2.1% and 3.6%, respectively. Therefore, there is a likelihood that the Bank of England (BoE) will maintain interest rates higher for longer. Before these numbers, the general view was that the bank would start cutting rates in June.
British banks welcomed these numbers since they usually benefit from high interest rates. Lloyds shares jumped by over 1.7% while NatWest spiked by over 1.3%.
Lloyds Bank is also doing well as investors cheer its recent financial results that dropped at a slower pace than expected. Its net income slipped by 9% to over £4.2 billion as its total costs soared to £2.4 billion.
Other data revealed that its customer deposits dropped to £469.2 billion from £473 billion in the same period in 2023. The company benefited from high interest rates as the Net Income Margin (NII) soared to £3.2 billion.
Like other European banks, Lloyds Bank has also focused on shareholder returns through dividends and share buybacks. It repurchased 500 million shares in February. As a result, its CET1 ratio has dropped to about 13.9% and the management sees it reaching 13.5% by the end of the year.
Therefore, with Lloyds Bank, we have a strong franchise with a dividend yield of over 4.8%. It will also continue doing well even when the BoE starts cutting interest rates. It is also significantly undervalued compared to its American peers.
Lloyds share price forecast
Turning to the weekly chart, we see that the LLOY stock price has been in a strong bull run this year, as I predicted. It has recently surged above the crucial resistance level at 49.76p, its highest point in 2023 and the upper side of the ascending triangle.
Lloyds Bank has continued soaring above the 50-week and 200-week Exponential Moving Averages (EMA), which is a positive sign. The Relative Strength Index (RSI) and the MACD indicators have continued rising.
Therefore, the outlook for the stock is bullish, with the next point to watch being at 62.50p, its highest point in December 19th. That price is about 10% above the current level. A break about that level will point to more gains.
The post How high can the Lloyds share price surge? appeared first on Invezz
