As a Lloyds Banking Group (LSE: LLOY) shareholder, it’s great to finally be able to say the shares have had a good year. Well, so far at least. The rise has carried on through May, pushing the Lloyds share price up 35% in 2021. Will the momentum keep on driving the shares up through June?
Well, I’m not seriously going to try to predict where Lloyds will go next month. That’s for two reasons. One is that anything can happen in such a short timescale, and one-month movements are hard to distinguish from random. The other reason is that I’m lousy at the prediction game anyway.
But do I see value in taking stock of what’s happened and thinking about the things that could affect the Lloyds share price through June and beyond.
Lloyds share price weakness
Lloyds shares are still down around 12% since mid-February 2020, just before the pandemic hit and the stock market crashed. Prior to that, Brexit uncertainty was giving Lloyds shareholders a hard time. We still face that, but are there any pandemic uncertainties left?
In its Q1 update for March, Lloyds reported a £459m impairment release, due to the improving economic outlook. It still had a net impairment credit of £323m in the quarter, mind. But that means the impact of the pandemic crash on the bank’s bad debt situation hasn’t turned out as badly as feared. And further improvements over the rest of the year could see Lloyds freeing up more of the cash it’s set aside.
That could give the Lloyds share price an extra lift, though boosting dividend prospects. The bank has already paid a 0.57p dividend, though that’s hardly the amount retirement dreams are built on. But it’s the maximum that the PRA will allow right now. So we’ll have to wait and see what dividend levels Lloyds will pay when free market conditions return.
The resumption of dividends
At Q1 time, Lloyds said it was “accruing dividends with intention to resume progressive and sustainable ordinary dividend policy.” Once that’s back in place, I think we really can start to see things as back to normal.
The next update on Lloyds’ future dividend policy should come with July’s first-half results. But without anything scheduled for June, I think its share price could drift sideways for a while. Still, June could be a very important month for Covid-19 progress. And any economic news could have an effect.
Anyway, whatever happens to the Lloyds share price in June and over the next few months, it’s not too important to me. And I reckon there’s probably as much chance of short-term losses as gains.
But I do think the positive progress the bank’s made in the first quarter could well set it up for a good year. And then we come back to the risks posed by Brexit.
I’m holding, and I might even top up.
