More branch closures and an ongoing scandal: is the Lloyds share price at risk of falling further?

The Lloyds share price has been doing well lately but is now at a critical deciding point. Our Fool UK writer considers factors impacting the price.

| More on:
Young Black woman using a debit card at an ATM to withdraw money

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Lloyds (LSE:LLOY) share price has been trading in a tight range between 40p and 50p for almost a year now. The past month has been particularly good though, with the share price climbing almost 20%.

On the chart below, we see that it’s once again attempting to secure a decisive break above the key 50p level that supported the price before Covid. Similar attempts were made in early 2022 and 2023 but it failed to stay above 50p for long.

Third time lucky?

Lloyds share price
Created on

I’m looking at the various factors that could decide the direction of the price, including an announced fresh spate of branch closures and a looming scandal on the horizon.

Damage control?

In the current economic environment, several factors can impact a bank’s share price. Most notable are interest rates, followed by the rising cost of living, and mortgage rates combined with an increased demand for housing. 

Branch closures, by comparison, are likely the least of its concerns. For the most part, closures are the result of dwindling foot traffic as new customers increasingly adopt mobile banking.

The interest rate situation remains uncertain but so long as rates remain high, Lloyd’s is benefiting. The extra revenue means Lloyds has been able to spend £2bn on share buybacks this year, with a further £1.4bn planned.

On paper, this all looks good for the investor but read between the lines and it could be the actions of a bank doing damage control. 

Another financing scandal

Lloyds has been identified as a key offender in the recent motor vehicle financing scandal. It became the first bank to publicly announce a compensation package in response to the allegations, to the tune of £450m.

It’s too early to know just how deep the scandal goes. However, people have already begun comparing it to the PPI scandal that rocked Britain in the early 2010s. While it may never reach that level, it’s hard to ignore the similarities between the two.

Furthermore, there’s been a swathe of insider transactions in the past three months. Notably, chief sustainability and corporate affairs officer Andrew Walton recently sold 396,387 shares to the tune of £192,485. However, he reportedly received 3.7m vested shares as part of an incentive plan days prior to the sale so the sale seems small by comparison, .

Decent financials

Looking at its balance sheet and recent earnings, Lloyds appears to be doing quite well.

  • Independent analysts estimate shares to be undervalued by 56%, with an average one-year price target of 59p — up 20% from current levels
  • Last month’s earnings report revealed record pre-tax profits of £7.5bn, up 57%
  • Liabilities are well-covered by assets
  • Its reliable dividend with a 5.6% yield is a nice cherry on top

So overall, other than the vehicle financing scandal, Lloyd’s is in a fairly good position. If I were already invested, I would hold for now.

To buy?

Well, I’d want to see a sustained move above 50p before I made a decision. Yes, I’d miss out on the cheap entry point. But when it comes to my portfolio, I tend to err on the side of caution.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Investing freedom — but inside a pension

Strapped consumers might be cutting back on investing, but they’re still keeping up their pension contributions. The only problem? A…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Forget gold! I’d rather buy these 3 FTSE high-yielders in a Stocks and Shares ISA

Gold looks like a risky investment to me as the price hits an all-time high. I'm ignoring the fuss to…

Read more »

Young female business analyst looking at a graph chart while working from home
Growth Shares

This 55p UK stock could rise more than 300%, according to a City broker

This UK stock has fallen from above 800p to below 60p. But analysts at Citi believe it’s capable of a…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

I think this FTSE 250 trust has all the right ingredients to lock in long-term profits

Today I'm examining the prospects of a private equity investment trust on the FTSE 250 that caught my attention recently…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 under-the-radar UK shares investors should consider snapping up

Two UK shares have caught the eye of our writer. She explains why investors should be taking a closer look…

Read more »

Investing Articles

Are these 2 ultra-high-yielding income stocks a good buy for me?

These two income stocks often split the debate amongst investors. So what does our writer think of them as potential…

Read more »

Senior woman potting plant in garden at home
Investing Articles

5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the…

Read more »

A young Asian woman holding up her index finger
Investing Articles

I’d aim for a second income of £1,000 a month with this super-reliable dividend stock

I think a great way to build a second income stream is by investing in dividend stocks via a Stocks…

Read more »