Lloyds Earnings What to Watch

Lloyds will unveil third quarter earnings before the opening bell Thursday 31st October. These are the areas traders will be zoning in on.

PPI
Provisions for mis-selling PPI have been a key theme for British lenders this earning season. A surge of last-minute PPI claims prior to the August cut-off date will be reflected in Lloyds results and are expected to dent the bottom line.

Lloyds PPI bill is expected to be in the region of £1.2 - £1.8 billion for claims, this is on top of the £650 million that it set aside in the first half. Assuming a mid-point of £1.5 billion, this puts the cost for PPI claims in 2019 at £2.3 billion.

In September Lloyds suspended its share buyback programme owing to the extraordinary PPI costs, which will have totalled £26 billion since the first claims in Q1 2011.
The extra costs have knocked the investment case for Lloyds, hitting return on equity, inhibiting the banks’ ability to build capital buffers and to distribute cash.
With the deadline of 29th August now behind us Lloyds should be able to draw a line in the sand over PPI.

Net Interest Income
The low interest rate environment has been less that conducive for UK banks, negatively impacting net interest income (NII). Interest margins have also been under pressure amid increasing competition, particularly in the mortgage market. With net interest margins falling, profits are taking a hit.
With Brexit uncertainty still lingering and inflation falling, the next move by the BoE is more likely to be a rate cut than a rate rise. Potentially meaning more pressure on NII going forward.

Impairment costs
Bad loan write downs are on the increase across the big 5 FTSE 100 banks, albeit at a low level. Investors and analysts alike will be keeping an eye on this. A continued increase could indicate that borrowers are struggling, a concern for Lloyds and the wider economy.
Brexit
Brexit uncertainty is set to continue for some time yet. This means that Lloyds and the wider UK banking sector will continue to experience unpredictability. Whilst a no deal Brexit would be very damaging to Lloyds, the continual delay of Brexit is a drag on the stock.

Lloyds levels to watch:
Despite it’s fair share of headwinds, Lloyds is trading 12% higher across the year. It has rallied over 9% in the last 3 months as the chances of a no deal Brexit decrease. Lloyds on the daily chart trades above its 50 & 100 sma, and is just marginally below the 200 sma.
Support can be seen at 56p and 54p. On the upside a break above 58.8p could open the doors to 60.3p.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

Contracts for Difference (CFDs) are not available to US residents.

FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.

Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.

Know your advisor