Lloyds share price slides as fresh Wirecard-related problems emerge

Summary:
• Lloyds share price dropped as investors focus on the ongoing earning season in the United States. The company is also among the biggest lenders to Wirecard.

Lloyds share price is down by more than 0.50% as traders react to news that the company is caught up in the messy Wirecard bankruptcy. The shares are trading at 30.35p, which is within the range it has been in the past few days. Other banks in the FTSE 100 are not doing well either. Indeed, HSBC, Barclays, Standard Chartered, and RBS, are the worst-performing stocks in the FTSE 100 today.

Lloyds caught up in Wirecard mess

Lloyds has been under pressure. And the ongoing earnings season in the US shows that the company could be at risk when it releases its earnings later this month. The challenge for the high-street bank is that it does not have a vast trading division to cushion its consumer and credit division. In fact, if it were not for the trading division, companies like Goldman Sachs and Morgan Stanley would have made significant losses in the quarter.

Now, Lloyds has other problems to deal with: Wirecard. According to the Wall Street Journal, the bank is among the 15 lenders who offered a $2 billion revolving credit to the firm. The paper said that the firm owed about 120 million euros to the company. However, unlike Barclays, the bank decided to sell the debt at about 18 cents on the euro. The bank did this because it did not expect the bankruptcy proceedings to have any value to investors.

Barclays, on the other hand, continues to hold on to some debt hoping that it will recoup some of the funds. Since banks extend credit, they are usually the first ones to be paid in insolvency proceedings.

Lloyds share price forecast

Lloyds share price is trading at about 30p. On the daily chart, the price is below the 50-day and 100-day exponential moving averages. It is also just 3 pounds above its 11-year lows. Also, its volatility, as measured by the Average True Range (ATR) has continued to fall. Therefore, I expect that the bank’s share price to continue falling as bears target the next support at 27.50p.

However, a move above the 50-day EMA at 31.50p will invalidate this thesis. It will mean that there are more bulls in the market, who will be keen to push the price higher.

Lloyds share price forecast