Lloyds share price analysis: is this serial laggard a good buy?

Lloyds (LON: LLOY) share price continued its strong sell-off this week even as the bank announced plans to reduce its operation costs. The stock, which surged to a high of 48.35 on December 29th, has suffered a harsh reversal and collapsed to 41p, making it one of the worst performers. 

On paper, Lloyds Bank is one of the best banking groups in the UK, serving over 27 million customers. Unlike Barclays, the company focuses domestically in the retail banking sector, meaning that it does not go through the boom and bust cycles of investment banking. 

Lloyds Bank is also a good rewarder of shareholders through its strong dividend track record. It now has a dividend yield of over 6%, which is higher than that of mainstream banks like JP Morgan and Bank of America.

Most importantly, Lloyds has established a track record of modest revenue and profitability growth over the years. Its figures have risen in the past two years, helped by the monetary policies by the Bank of England (BoE), which has hiked rates to the highest level in years.

Lloyds Bank is also saving money. On Thursday, the company announced that it will lay off 1,600 workers of its branches as it seeks to boost its online offerings. As it does this, the bank will also hire workers to offer online services.

LLoyds joins other banks that are cutting jobs in a bid to boost their profits. For example, Citigroup, an American company, is cutting 20,000 jobs as it seeks to reduce its bureaucracy and costs. Other banks like Goldman Sachs, JP Morgan, and Bank of America have reduced costs.

The challenge for Lloyds is that it has continued to underperform the market over the years. That has led to substantial disappointment to retail traders since it is owned by millions of them. For example, the stock has remained between 36.38p and 51.5p since 2022. 

Most notably, the shares have never recovered from the Global Financial Crisis (GFC). They remain about 77% below their highest level in 2008. This is in contrast to what other banks have done in this time. For example, in Italy, the Unicredit share price has jumped to a record high. Similarly, banks like UBS, JPMorgan, and Morgan Stanley have thrived.

These developments mean that investors who added money to Lloyds Bank have not made any reasonable money in the past few years. Worse, I can’t think of any catalyst that will propel the stock higher.

I have written about Lloyds Bank several times before and recommended against investing in the stock. You can read some of those reports here and here. Now, turning to the weekly chart, we see that the stock is now on track to drop for five straight weeks, its longest streak since August 2021.

Lloyds Bank stock has also formed what looks like a head and shoulders pattern, which is a popular bearish sign. It has also moved below the 50-week moving average. Therefore, the outlook for the stock is bearish, with the next point to watch being at 36.38, the lowest swing in October last year.

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