The shops have already started arranging their Christmas displays. And it got me wondering what we long-suffering Lloyds Banking Group (LSE: LLOY) shareholders might like as a gift this year. The renewed dividends have already cheered me up. But a bit of festive season improvement in the Lloyds share price would be nice, wouldn’t it?
Lloyds has a Q3 update due on 28 October, so what help might we get from that. At the interim time, Lloyds reported a net impairment improvement of £333m in the second quarter. That was driven partly by economic improvements. I do think it’s a little early to put too much faith in the economic outlook just yet though.
Also, at the time, the bank said it still had “management judgements in respect of coronavirus retained, now c.£1.2 billion.” I’ll be looking to see further progress in impairments reduction. If the trend can at least keep up with the progress of the first half, I reckon it could lift confidence in the stock and give the Lloyds share price a bit of a kick.
The next thing is the economy itself. Judging by the erratic nature of stock markets in recent weeks, sentiment has been all over the place. It’s not so much positive and/or negative vibes from the talking heads in the City that counts so much for me. No, it’s consistency in outlook that I reckon should make the most difference.
Inflation’s coming back, with some predicting 4% by the end of the year. It seems almost certain then that the Bank of England (BoE) will raise interest rates before too much longer. The period of super low interest rates we’ve been in for years has been bad for Lloyds. Banks certainly have a harder time making profits by lending money when base rates are down at 0.1%.
Some are even suggesting the BoE could lift rates before the end of the year. I’m not too bothered whether it’s now or later, but the investing institutions prefer facts to probabilities. And I think an actual rate hike is likely to do more good than an expected one.
Some folks are wary of Lloyds’ tie-up with Barratt Developments in the build-to-let business, and I can understand their concern. It’s not really something that banks traditionally do. But Lloyds is already the UK’s biggest mortgage lender, which ties its fortunes to that market anyway. I like the deal, but how is it likely to sway the Lloyds share price?
Barratt has already delivered an upbeat trading update in October. The current year, which started in July, is off to a “strong and sustained start.” The company has largely escaped any supply chain problems too. Barratt faces pressures though, expecting build cost to rise 4-5% in the year.
We’re due a trading update from Taylor Wimpey on 11 November. If that helps offset housing concerns, I reckon it could help Lloyds too. As, I think, could any positive updates on mortgage figures and property prices.
Lloyds share price future?
Of course, the Lloyds share price might just keep on doing what it’s been doing for years, and carry on sideways. It could even fall. But as long as the dividend recovery keeps going, I’ll be happy enough.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.