Lloyds share price forecast: plot thickens after Barclays earnings

Lloyds Bank (LON: LLOY) share price made a strong bearish breakout on Tuesday after Barclays published relatively weak financial results. It also crashed after the weak British manufacturing and services PMI numbers. The shares dropped to a low of 39.40p, the lowest point since November last year. They have slipped by over 21% from the YTD high.

European banks published mixed financial results on Tuesday. Unicredit, the second-biggest Italian bank, said that its revenue and profitability soared in the third quarter as interest rates rose.

In the UK, Barclays results were not great. Its net profit crashed by 16% during the quarter, pushing the company’s CEO to preempt cost cuts. Its UK profits dropped by 3% even as net interest income rose. 

Many British consumers have started moving money from their deposits to higher-yielding products like money market funds. Indeed, the biggest British banks have lost billions of dollars in deposits in the past few months.

Barclays also saw its investment bank profits retreat even as the number of deals rose. This profitability dropped by 29% to over 721 million pounds. Its advisory and capital markets revenue and profits also retreated.

These results are important for Lloyds Bank because it will publish its financial results on Thursday. The most important part are Barclays’s net interest income because Lloyds is the biggest bank in the UK. Therefore, there is a likelihood that the company suffered the same fate in the third quarter.

Further, there are signs that the British economy is not doing well. According to S&P Global, the country’s manufacturing PMI dropped to 48.5 while the services PMI fell to 49.2. A PMI reading of less than 50 is a sign that a sector is weakening.

LLOY chart by TradingView

Regular readers know that I have been quite bearish on Lloyds Bank. While LLOY is a good bank, its stock has been a big disappointment to investors. It has plunged by more than 20% from the highest point this year, meaning it has moved to a bear market.

Lloyds share price has dropped below the 50-day and 100-day moving averages while the MACD has moved below the neutral point. It has also formed a descending triangle pattern. Therefore, the shares will likely continue falling as sellers target last year’s low of 36.50p.

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