Market News & Analysis


Top Story

Lloyds Jumps 2.5% Despite 26% Fall In Profits

Lloyds, the last of the big 4 banks to report full year earnings. To say the bar was set low would be an understatement. 

Results
  • Annual profit -26% to £4.4 billion vs £3 billion expected
  • Underlying profits -7% to £7.5 billion
  • Net income -4% to£17.1 billion

Lloyds reported a 26% decline in annual profits owing to bad loans and high compensation payout from PPI. PPI redress totaled £2.5 billion in 2019 however this is expected to be the end of the payouts after the PPI deadline passed at the end of summer 2019.

Impairments on bad loans spiked by 38% to £1.3 billion vs. £937 million, the previous year owing to a reduction in NIM and in part to the failure of two large companies which knocked the commercial division. Whilst the bank couldn’t confirm the name of the companies Lloyds was known to have been one of the main lenders to collapsed holiday firm Thomas Cook.

Tough 2019, improving conditions 2020?
Last year the bank struggled with slowing global growth but perhaps more importantly domestic political uncertainty, as Brexit dragged on business and consumer confidence. This year the macro climate in the UK appears to be setting off on the right foot but the problems have by no means evaporated. 

GDP at the end of 2019 beat expectations, whilst in January the labour market remained strong, inflation increased, and retail sales jumped indicating a bounce in the UK economy. Given the strong correlation between Lloyds and the UK macro climate, this is encouraging. However, there are still plenty of potential pitfalls ahead as the UK negotiates a trade deal with the EU and the macro climate in the UK is expected to remain challenging. Despite this, the outlook from Lloyds was relatively stable.

March’s Budget To Lift Lloyds Further?
Whilst low interest rates squeezed margins at the lender last year, an expansionary fiscal policy could underpin the share price in early 2020. Higher government spending would take the pressure off the Bank of England to cut interest rates, thus supporting the net interest margin’s at the banks. All eyes will turn towards Rishi Sunak’s Budget next month to see whether he can deliver the higher spending the markets hope for.

Chart thoughts
The share price has jumped over 2.5% this morning, taking Lloyds above its 50 sma on 4 hour chart. The rally has been capped by resistance around 58.1p (100 sma & 14 Feb high). A meaningful move through this strog resistance could see the doors opened to 59.3 (24th Jan high) prior to 60p (10 Jan high).
On the flip side support can be see around 55.65p (yesterday’s low).



Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.