Lloyds share price has remained in a tight range in the past few days as the important resistance level at 100p remained elusive. It was trading at 96p as the post-Autumn Budget rally stalled. It has jumped by 84% this year, its best performance since 2012 when it soared by 86%. So, does the stock have more gains to go in the near term?
Why Lloyds share price is rising this year
Lloyds Bank stock price has been in a strong rally this year, outperforming the FTSE 100 Index and most of its peers like Barclays and Metro Bank.
The rally happened even as the British economy remained in a bind, which was characterized by high inflation, taxes, and slow growth.
One main reason for the rally is that the high inflation rate has pushed the Bank of England (BoE) to maintain a hawkish view throughout the year. The bank has benefited from high interest rates, which have increased the spread between what it pays on assets compared to what it pays on liabilities.
Higher interest rates have pushed the company to generate strong financial results. Its statutory profit after tax rose to £3.3 billion in the nine months of the year. Its return on tangible equity was 11.9%, down from the previous 14.6%.
The decline was because of its large provision on the motor insurance crisis. Its remediation cost for the nine months rose to £912 million from the £124 million it spent in the same period last year. On the positive side, the crisis is now nearly over, meaning that the company will not spend more money on it.
Rachel Reeves spares banks from windfall taxes
Most recently, the Lloyds share price has risen as Rachel Reeves spared the bank from paying a windfall tax that some analysts were expecting. A few months ago, a top British think tank known as the Institute for Public Policy Research (IPPR) predicted that a windfall tax would raise billions of pounds without hurting the British economy.
Reeves judged that implementing the windfall tax would be retrogressive and make it tough for the country to attract more companies in the financial sector.
Lloyds Bank share price has jumped this year, mirroring the performance of other European banks like Unicredit, Standard Chartered, Deutsche Bank, and Commerzbank.
Looking ahead, analysts are a bit pessimistic about the company noting that it lacks a clear catalyst going forward. Analysts also warn that the company has now become highly overvalued and that it is due for a correction. In a recent note, MorningStar analysts noted the stock should be valued at 78p, which is much lower than the current 95p.
On the positive side, however, the stock will likely continue doing well as long as the global stock market bull run continues when central banks like the Federal Reserve and Bank of England (BoE) start cutting interest rates.
Lloyds stock price technical analysis
The daily timeframe chart shows that the LLOY stock price has remained in a bull run in the past few months and is now hovering near its highest level this year.
However, it has now formed a double-top pattern whose neckline is at 85.80p. The Relative Strength Index (RSI) has moved from the overbought point of 75 to the current 59, while the two lines of the MACD indicator are nearing their bearish crossover.
Therefore, there is a risk that the stock will pull back in the near term. If this happens, the next key support level to watch will be at 90p.
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