The Lloyds share price (LON: LLOY)continues to show signs of a continued bullish trend, with today’s trading session seeing a small price surge at press time. This is also a continuation of last week’s almost 6% rise, which gave most investors an optimistic outlook about the company’s continued growth.
Lloyds Banking Group is a major player in the UK banking sector, serving over 26 million customers across its multiple brands. Its share price has been a subject of discussion among analysts and investors, with some seeing potential for growth in 2023, while others are more skeptical. One positive factor cited in support of Lloyds is its strong balance sheet, with a CET1 ratio of 15% and liquidity coverage ratio of 146%.
This suggests that the bank has a strong foundation and is well-positioned to weather any potential economic challenges. Additionally, the bank is expected to benefit from the recent interest rate hikes by the Bank of England, as higher rates boost the margin between the rates banks offer to borrowers and to savers.
However, there are also concerns about the outlook for the UK economy and the impact this could have on Lloyds. Some analysts predict a recession lasting until the end of next year, with KPMG expecting a 0.2% GDP rise in 2024. This could pose a particular risk to Lloyds, given its focus on UK retail banking and narrow geographic focus. There is also the threat of competition from digital banks, which have seen revenues grow at a compound annual rate of 750% between 2018 and 2021.
Lloyds shares have rebounded strongly since October’s weakness and are up almost 6% in the first week of 2023. However, economists forecast a recession in the UK this year, which could impact the bank’s performance. In addition, a combination of rising inflation, high energy bills, and interest rates could send loan losses and bad debts soaring.
Despite these challenges, Lloyds has a strong balance sheet and a market-beating dividend yield of 4.4%. Some analysts are optimistic about the stock’s potential for future dividend income and capital gains.
Therefore, based on the fundamental analysis above, my Lloyds share price forecast for 2023 expects it to continue trading in an aggressive bullish trend as it has been since mid-October, which has resulted in its value increasing by more than 20%.
There is a high likelihood that we might see its value trade above 50p within the next few trading sessions, and for the long-term, above the 80 price level. A drop below the 40p price level, however, will invalidate my strong bullish analysis.
This post was last modified on Jan 09, 2023, 12:53 GMT 12:53