Lloyds, the last of the big 4 banks to report full year earnings. To say the bar was set low would be an understatement.

 

Results

Annual profit -26% to £4.4 billion vs £3billion expected

Underlying profits -7% to £7.5 billion

Net income -4% to£17.1 billion

Lloyds reported a 26% decline in annual profits owing to bad loans and high compensation payout from PPI. PPI redress totaled £2.5 billion in 2019 however this is expected to be the end of the payouts after the PPI deadline passed at the end of summer 2019.

Impairments on bad loans spiked by 38% to £1.3 billion vs. £937 million, the previous year owing to a reduction in NIM and in part to the failure of two large companies which knocked the commercial division. Whilst the bank couldn’t confirm the name of the companies Lloyds was known to have been one of the main lenders to collapsed holiday firm Thomas Cook.

 

Tough 2019, improving conditions 2020?

Last year the bank struggled with slowing global growth but perhaps more importantly domestic political uncertainty, as Brexit dragged on business and consumer confidence. This year the macro climate in the UK appears to be setting off on the right foot. GDP at the end of 2019 beat expectations, whilst in January the labour market remained strong, inflation increased, and retail sales jumped indicating a bounce in the UK economy. Given the strong correlation between Lloyds and the UK macro climate, this is encouraging. However, there are still plenty of potential pitfalls ahead as the UK negotiates a trade deal with the EU and the macro climate in the UK is expected to remain challenging. Despite this, the outlook from Lloyds was relatively stable.

 

March’s Budget To Lift Lloyds Further?

Whilst low interest rates squeezed margins at the lender last year, an expansionary fiscal policy could underpin the share price in early 2020. Higher government spending would take the pressure off the Bank of England to cut interest rates, thus supporting the net interest margin’s at the banks. All eyes will turn towards Rishi Sunak’s Budget next month to see whether he can deliver the higher spending the markets hope for.

 

Chart thoughts

The share price has jumped over 2.5% this morning, taking Lloyds above its 50 sma on 4 hour chart. The rally has been capped by resistance around 58.1p (100 sma & 14 Feb high). A meaningful move through this strog resistance could see the doors opened to 59.3 (24th Jan high) prior to 60p (10 Jan high).

On the flip side support can be see around 55.65p (yesterday’s low).

LLY

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD consolidates weekly gains above 1.1150

EUR/USD consolidates weekly gains above 1.1150

EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.

EUR/USD News
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains

GBP/USD stabilizes near 1.3300, looks to post strong weekly gains

GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains. 

GBP/USD News
Gold extends rally to new record-high above $2,610

Gold extends rally to new record-high above $2,610

Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.

Gold News
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap

Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap

SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.

Read more
Bank of Japan set to keep rates on hold after July’s hike shocked markets

Bank of Japan set to keep rates on hold after July’s hike shocked markets

The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session. 

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures