Lloyds Banking Group's share price has lost momentum in the second half of the year, sliding from a July peak of 117.80p to the current 101.85p. The retreat aligns with a broader sell-off in European banking stocks, and investor attention is now squarely on the lender's upcoming quarterly earnings report.
Q3 earnings preview
Lloyds is scheduled to publish its third-quarter results next week, and market participants are looking to the figures for signs of resilience in the UK banking sector. The consensus among analysts is that net interest income will come in at £3.828 billion, with other income contributing £1.69 billion. Total net income is projected at £5.1 billion for the quarter, bringing the year-to-date level to £14.8 billion.
On the bottom line, net profit is expected to reach £1.6 billion, lifting the year-to-date figure to £4.78 billion. Looking further out, revenue growth is anticipated to continue, with full-year net income forecasts of £20 billion, followed by £21.9 billion, £23.3 billion, and £24.6 billion in subsequent years.
Barclays, a key peer, recently reported an 8% rise in first-half total income to £23.86 billion, with quarterly revenue up 3% year-on-year to £7.36 billion. While Barclays' results often serve as a bellwether for UK banks, the two institutions differ significantly—Barclays has a substantial investment banking arm and international operations, whereas Lloyds is more domestically focused.
UK economy and BoE rate hike expectations
Fundamental indicators suggest Lloyds is well-positioned, supported by a resilient UK economy. Data released this month showed the unemployment rate fell to 4.1%, and the economy added over 100,000 jobs in the three months to August. Additionally, GDP rose 0.1% in August, beating expectations, and grew 2.1% year-on-year, partly driven by the ongoing artificial intelligence boom.
However, inflation remains stubbornly high, with the headline consumer price index rising last month and moving further from the Bank of England's 2% target. As a result, market odds of a BoE rate hike at the next meeting have jumped to 90%. Higher interest rates typically expand banks' net interest margins, which would benefit Lloyds.
Technical analysis
From a technical perspective, Lloyds shares have been under pressure. The stock has dropped below the ascending trendline that connected the lowest swings in March, May, and June, confirming a bearish outlook. It has also fallen beneath the 50-day exponential moving average and the Supertrend indicator, while the Relative Strength Index has formed a descending channel.
Given these signals, the share price could continue to decline, potentially testing the key support level of 95p. A move above 106.90p would invalidate the bearish scenario.
This article is for informational purposes only and does not constitute financial advice.
