Lloyds share price declined today as investors braced for more bankruptcies in the coming days. This is as more people in the UK stays indoors following last week’s government directive. The directive means that more Lloyd’s customers will be laid-off. It also means that most of them will struggle to pay-off their debt.
In addition, their corporate customers could have problems too. Many companies in the UK are not doing business and there are risks that many of them will fail especially if the lockdown continues for more months. In fact, a senior medical professional said that the lockdown could continue for about six months.
As I wrote earlier today, retailers have started filing for bankruptcy. Just yesterday, BrightHouse, which was a leading retailer moved into administration and analysts expect more companies to follow suit. In a worst-case scenario, it is possible that these bankruptcies will cause significant challenges for bank.
Meanwhile, a recent report says that UK banks could be forced to halt dividends worth more than £7.5 billion. These dividends were scheduled to be paid in the next few weeks. A halt of dividend means that more investors will jump ship to better-yielding companies. This could be worse for Lloyds, the worst-performing UK bank whose stock has dropped by about 50% in the past 12 months.
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On the Lloyd’s hourly chart, we see that the share price was trading in a descending triangle pattern until Wednesday last week, when it broke-out in the upside. This turned out to be a false breakout, since the price is flirting with its diagonal line. I expect the Lloyds share price to move back to the previous triangle pattern and possibly move below the support level of 29.93, which is the 9-year low.