Lloyds (LON: LON:LLOY) stock price joined the FTSE 100 in a major comeback as the fears of Israel and Hamas faded. The shares jumped to a high of 43.46p, much higher than this week’s low of 42p. Other British banks like Standard Chartered (LON:STAN), HSBC (LON:HSBA), and Barclays (LON:BARC) also soared.
Bank earnings ahead
Lloyds Bank shares jumped on Tuesday even after the IMF warned about the UK economy. In a report, the agency warned that the country will see at least five more years of high-interest rates. It also believes that the country will have subdued economic growth and be the top laggard in the G7.
Lloyds Bank, as the biggest mortgage lender in the country, will be affected if these predictions are accurate. On the positive side, Lloyds Bank will benefit as high-interest rates lead to higher interest income.
On the other hand, slow economic growth and high inflation will affect the uptake of mortgages. It is also leading to slow deposit growth in the UK as people withdraw to spend and invest in high-yielding short-term bonds. Indeed, the biggest four UK banks have lost billions of dollar in deposits in the past few months.
The next important catalyst for the Lloyds share price will be the upcoming bank earnings season. American banking giants like JP Morgan, Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) will publish their results on Friday.
Other big American banks like Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), and Morgan Stanley (NYSE:MS) will release their results next week. Lloyds Bank is much different from these companies. Nonetheless, their results will provide guidance of what to expect when British banks release their results.
Lloyds Bank will publish its results on October 25th. Analysts expect these results to show that the company did well in the third quarter as interest income rose.
Lloyds share price forecast
In my last few articles, I have warned against investing in Lloyds Bank, citing the company’s long history of underperformance. The shares have formed an inverted head and shoulders pattern, which is usually a bullish sign.
It has moved above the key support level at 41.37p, the lowest level in September and June. The stock has also moved slightly above the 50-day moving average while the Relative Strength Index (RSI) has moved slightly above the neutral point.
Therefore, while I expect the stock to lag over time, there is a likelihood that it will bounce back in the coming days as traders wait for the upcoming earnings. If this happens, the shares will likely retest the key resistance at 46p.
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