Lloyds Bank (LON: LLOY) share price has crawled back in the past few days even as the UK economy stares at a major recession. The stock was trading at 44.75p on Wednesday, which was slightly above July’s low of 40.71. It has dropped by about 10% in 2022 and underperformed the FTSE 100 index.
Banking in a recession
Lloyds Bank is the biggest banking group in the UK with over 30 million customers. The firm operates under several brands like Halifax, Scottish Widows, and MBNA among others. With no major operations abroad, Lloyds – together with Tesco – is seen as a viable barometer of the UK economy.
Lloyds Bank share price has crashed by 10% in 2022 as the company goes through changes. Earlier this year, the company announced a new strategy whose goal is to help Britain prosper. The new approach has seen the business put more effort on real estate, wealth management, and technology investment.
The stock has dropped sharply even after the Bank of England (BoE) delivered a series of rate hikes. It has increased rates in all its meetings since December last year. And in July, the bank delivered a 0.50% rate hike. Analysts believe that the bank will continue hiking interest rates this year.
Interest rate hikes are usually seen as positive for bank stocks because they increase their margins. For example, customers with variable mortgages are now paying more interest than they did a year ago. As a result, the firm’s net interest income rose from 5.4 billion pounds in the first half of 2021 to over 6.3 billion in the first half of this year.
However, the biggest concern is that the UK is set to go through a deep recession this year. Indeed, the GBP/USD price has dropped to the lowest level since 1985. A recession and a weak pound will likely have a negative impact on UK banks.
Lloyds share price forecast
The daily chart shows that the LLOY share price has been in a strong bearish trend in the past few months. Most recently, the stock formed a descending channel that is shown in black. The current price is close to the upper side of this channel.
The shares have moved slightly above the 25-day and 50-day moving averages while the Awesome Oscillator has turned green. Still, there is a likelihood that the stock will likely resume the bearish trend as sellers target the lower side of the channel at about 40p.
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