Lloyds Share Bank Price Rally Continues But Headroom Limited

Summary:
• Lloyds share price has climbed to the highest since January 2022, as high interest rates increase profit margins. But what if BoE cuts rates?

Lloyds Bank Share price sustained its upward momentum on Tuesday, as it opened trading at 54.32p. The bank’s share price gained 4 percent last week, and has registered five consecutive daily wins as of this writing. At its current price Lloyds share price is at its highest point since January 2022, underlining a good performance in a high interest rate environment.

The bank’s performance in the stock market comes on the back of news that it faces stiff competition in the mortgage sector. Lloyds reported a decline in its earnings in the first quarter of the year, attributing it to increasing competition from other mortgage lenders who were offering customers better deals. This could affect the bank’s income in the medium-term, and a second successive decline in quarterly earnings could pull down the share price.

Lloyds recently announced that it will close 40 bank branches, including 22 from Halifax between April and June 2024. That is expected to result in reduction in operation costs, much as it is not expected to lead to any job losses.

Many banks have been reporting better-than-expected earnings, boosted by high interests in the UK. The Bank of England is expected to cut interest rates in the second half of 2024, and this could impact earnings in the third quarter of the year. While the inflation rate is still above the target 2 percent, the UK economy has been struggling in the last year, and only recently came out of a technical recession. In addition, the latest labour market data showed that the rate of unemployment rose to 4.3 percent in the first quarter of the year. Therefore, higher-for-longer interest rates could hurt the economy further.

Technical analysis

Lloyds share price pivots at 53.70, and the momentum favours a continuation of the upside if the buyers keep the price above that mark. In that case, the next resistance is likely to come at 54.94, and a move beyond that level could build the momentum for further gains to test 56.10. However, if the price goes below the pivot point, the sellers will likely take control and the first support will likely be at 52.56. A continuation of that momentum will break the support and favour the sellers to move the price lower to 51.56.