Lloyds (LON: LLOY) share price dropped sharply on Thursday even after the encouraging UK GDP numbers. The shares dropped to a low of 47.95p, which was ~11.20% below the highest point this year. Focus now shifts to the upcoming bank earning season.
Bank earnings season
The biggest bank and finance news of the weel will be the upcoming earnings by the biggest banks in the US. On Friday, giant banks like Wells Fargo, Citigroup, and JP Morgan will publish their financial results.
They will be followed by other companies like Bank of America, Goldman Sachs, and Morgan Stanley that will release their results next week. Most of these banks are expected to publish strong results as banking deposits rose in March.
The banks to watch will be the smaller regional companies that have been the focus among investors and regulators in the past few weeks. A concern is that these companies will go through a challenging period as they are forced to have more capital.
Lloyds will not publish its results this month. Instead, it will deliver its interim statement on May 3. Nonetheless, the company’s stock will react to America’s bank earnings because of the close correlation that exists in the industry.
As we saw after the collapse of SVB and Credit Suisse, most bank stocks declined as fears of a contagion spread.
RBC upgrades Lloyds share price target
Lloyds share price dropped after the latest UK GDP data. Data by the Office of National Statistics (ONS) showed that the British economy moved above its pre-pandemic levels. The data showed that the economy was unchanged between January and February after expanding by 0.4% in the previous month. In all, the economy was 0.3% bigger than it was in 2020.
These numbers are positive for Lloyds Bank, a company that is often seen as a barometer for the British economy. As the biggest bank in the country, Lloyds does well when all parts of the economy are expanding. In a note, Jeremy Hunt, the Chancellor said:
“We are set to avoid recession thanks to the steps we have taken through a massive package of cost of living support for families and radical reforms to boost the jobs market and business investment.”
Looking ahead, I expect that Lloyds shares will be a bit volatile in the coming days as leading banks publish their financial results.
In a note on Wednesday, analysts at RBC said that they were optimistic about Lloyds as they boosted their rating to outperform. They expect the shares to jump to 70p, which is much higher than the current 48.48p. Other analysts at Citigroup, Berenberg, and Shore Capital are also bullish on Lloyds.
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