Lloyds Tumbles To 8 Year Low As Covid Hit Is Deeper Than Expected
Fiona Cincotta July 30, 2020 6:45 AM
Lloyds share price has dived over 7% in early trade as the UK’s largest retail bank plunged into a loss in the second quarter and warned on the outlook.
Lloyds share price has dived over 7% in early trade as the UK’s largest retail bank plunged into a loss in the second quarter and warned on the outlook.
• Lloyds reported a pre-tax loss of £676 million in Q2 compared to a pre-tax profit of £1.3 billion a year ago.
• Revenue fell -21% yoy to £3.5 billion as lower demand and lower interest rates hit income.
Expectations were low heading towards the release of Lloyds results, but the sheer size of the amount that Lloyds is putting aside for bad loans is nothing short of worrying.
Net interest margins, which measure the profitability of lending sunk by a whole 20 basis points to 2.59% in Q2 after the BoE slashed interest rates to 0.1% and as demand for loans and mortgages evaporates.
As the UK’s biggest domestic bank, Lloyds is considered a bellwether for the wider UK economy. The fact that Lloyds has warned that the impact from coronavirus was worse than forecast and that the bank has adopted a gloomier outlook doesn’t bode well.
Given the perfect storm that Lloyds is facing the chances of its dividend being re-instated anytime soon are looking weak at best.
Chart thoughts
Lloyds plunged by as much as 9% on the open following the release, hitting an 8 year low of 25.7p.
The share price trades firmly below its 50, 100 and 200 daily moving averages and below its ascending trendline in a clearly bearish chart.
Immediate support can be seen at today’s low of 25.7p before 24.7p the low from May 2012.
On the flip side, a break above today’s high of 26.1p could open the door to 30p the trendline and psychological resistance level.
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