Lloyds Bank share price has remained in a tight range in the past few weeks as some investors take profits after surging by over 50% from its lowest point in January this year. This article explores the top 3 main reasons to buy Lloyds.
Lloyds share price has strong technicals
The first main reason why the Lloyds stock is a good buy is its strong technicals. The daily chart shows that it bottomed at $50.88 between November and January. It has formed a triple-bottom pattern whose neckline was at 55.20p.
This triple-bottom pattern explains why the stock has surged in the past few months. It has remained above the 50-day Exponential Moving Average (EMA), a sign that bulls are control.
Lloyds share price has formed a bullish flag pattern. This pattern is made up of a vertical line that resembles a flagpole and a flag in the form of a descending channel. A bullish flag is one of the most positive chart patterns.
Therefore, the stock will likely have a strong bullish breakout, with the next point to watch being the year-to-date high of 79p, up by 3.65% from the current level.
A move above that target price will increase the odds of the stock rising to the next psychological point at 90p. A move below the 50-day moving average at 73.8p will invalidate the bullish view.
Read more: Can Lloyds share price surge to 100p after its earnings?
Lloyds Bank is a good dividend stock
The other main reason to buy Lloyds Bank stock is that it is a top dividend stock in the FTSE 100. Data shows that the company paid a dividend of 3.17 pence per share in 2024, a 15% increase from a year earlier.
Lloyds Bank has a dividend yield of about 4%, meaning that a £10,000 investment will bring in about £400 a year in dividends. Its dividend per share will be 3.51p this year, followed by 4.05p and 4.67p in the next two years.
In addition to dividends, the company is buying back substantial shares, which has reduced its outstanding shares to 60.45 billion from last year’s high of 60.46 billion.
The company will likely continue growing its payouts in the coming years. It ended the last quarter with a CET1 ratio of 13.5%, and the company hopes to reduce its ratio to 13% by the end of 2026.
Strong revenue and profitability growth
The other bullish catalyst for the Lloyds share price is that analysts anticipate that its business will continue growing.
City analysts believe the company’s net interest income will grow to £13.54 billion this year, followed by £14.7 billion and £15.64 billion in the next two financial years.
Analysts also expect that its profit for the period will rise to £4.6 billion this year, followed by £5.8 billion and £6.5 billion in the next two years.
This revenue and profitability growth will likely continue even when the Bank of England (BoE) cuts interest rates. Analysts expect the bank to leave rates unchanged on Thursday, and then resume the rate cuts later this year.
Motor insurance is a risk
The main risk that the company faces is its the motor insurance crisis. It set aside over £1.5 billion in provisions last year, and the Supreme Court is expected to rule on the issue in July. The FCA will also announce its redress on the issue.
Therefore, there is a likelihood that the company will be forced to pay as much as £3 billion. On the positive side, investors have already priced in these funds, meaning that any fine will not catch them by surprise.
Read more: Lloyds share price forecast: here’s why LLOY may surge soon
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