Lloyds Share Price Forecast December 2021 – Time to Buy LLOY?
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Shares of British financial institution Lloyds (LSE: LLOY) are in the green today after closing at 46.960p as of December 22nd (17:52 GMT). LLOY share price has been on a general uptrend over the past year. However, on closer inspection, we see that the share price is still down 25% from its pre-pandemic levels and hasn’t recovered since the 2008 financial crash.
Lloyds – Technical Analysis
The financial statement of Lloyds indicates that a market cap of £32.905 billion and has total assets worth £879.687 billion. Revenue for 2020 was at £34.12 billion with a profit margin of 2.54% compared to £49.42 billion in 2019.
Moving averages such as Exponential Moving Average (10)(46.206), Simple Moving Average (10)(45.827), Exponential Moving Average (20)(46.654) and Simple Moving Average (20) (46.489) are indicating a buy action. On the other hand, oscillators such as Relative Strength Index (14)(50.174), Stochastic %K (14, 3, 3)(54.411), Commodity Channel Index (20)(39.240), Average Directional Index (14)(20.275) and Awesome Oscillator(−1.613) are neutral.
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Recent Developments
Lloyds has delivered a 27% year-to-date return. Its new chief Charlie Nunn has announced several new growth plans for the company, aimed at enhancing the bank’s position in some of the markets where it’s not strong, such as wealth management and investment banking. It has also tapped into the private landlord market by introducing its newest venture, Citra Living. If Citra Living becomes a success in the next year, the share price can get an additional push upwards.
Lloyds has always been a very safe investment. While it offers a dividend of 2.73% compared to the UK average of 4%. The bank has excellent brand recognition and has the largest presence of any in the public zeitgeist. Its bank adverts are the most ubiquitous and memorable of any in the sector. Over the course of 2021, it announced the closure of 90 of its branches across the UK. While closing branches assists in cutting costs, it can also shrink Lloyds’ high street presence that will hurt its branding.
Lloyds’ mortgage book remains profitable, standing at £308 billion at the end of September. It has also been expanding into other business areas such as growing its own residential property portfolio. While these new business segments can distract the management, its success can add a lot of value to the bank’s operations.
Should You Buy LLOY Shares?
The LLOY share price movement has also been strong but it still doesn’t reflect the company’s financial potential. While its current market cap is at £33 billion, the bank has actually made a profit attributable to ordinary shareholders of £4.6 billion in the first nine months of the year. The company can provide a much bigger dividend which it can fund from its current excess capital. As many investors expected a raise, it is already factored into the share price.
However, there is always the risk of the share price dropping as Initial costs building up the property business could hurt profits. Lloyds’ profit could also be hurt if the broader economy declines. Struggling businesses defaulting on loans could lead to bigger provisions, which will eat away profits. On top of that, the risk of the Omicron variant may hamper the UK economy’s recovery. The announcements of more lockdowns can dampen its various other business ventures. However, in spite of this, you can look to buy and hold LLOY shares for the long term.
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