Lloyds share price crawls back ahead of BoE decision: will the gains hold?

Lloyds share price rose for three consecutive days as London stocks continued their recovery today. It rose to 97.45p on March 18, up by 5.95% from its lowest level this month as investors focus on the upcoming Bank of England interest rate decision.

Analysts predict hawkish Bank of England 

Lloyds Bank, the parent company of Halifax, Bank of Scotland, and Scottish Widows, will be in the spotlight this week as the Bank of England (BoE) publishes its interest rate decision.

Economists expect the bank to respond aggressively to the current economic conditions as officials are convinced that the Iran war will lead to higher inflation. Airlines have boosted their fares, while crude oil and natural gas prices have jumped to their highest levels in months.

A hawkish tilt may see the bank hint of a potential interest rate hike as the Reserve Bank of Australia(RBA) did on Tuesday. It hiked rates for the third consecutive meeting.

Analysts believe that the bank will leave interest rates unchanged at 3.75% as it buys time to respond to the evolving events. The Office for Budget Responsibility (OBR) has predicted that inflation will end the year at 3%, higher than the bank’s target of 2%. As a result, markets are pricing in a 50% chance of a rate hike this year.

Lloyds Bank will likely benefit from the hawkish Bank of England because of its business model. As a bank, higher interest rates normally leads to a higher net interest income. 

Lloyds Bank’s business is doing well 

The most recent annual results showed that the company was doing well, with revenue and profitability continuing to grow. 

The results revealed that the company delivered £1.5 billion of annualized additional revenue last year from its strategic initiatives. It now hopes to deliver £2 billion this year, higher than the previous guidance of £1.5 billion.

Lloyds Bank delivered a statutory profit before tax of £6.7 billion, £700 million higher than what it made in 2024. Its underlying net income jumped by 6% to £13.6 billion as its net interest margin rose to 3.06%.

The main blemish in its report was a £968 million remediation cost associated with the motor finance commission arrangement. On the positive side, there are chances that the remediation cost will fall or end this year.

Lloyds Bank expects that its net income will rise to £14.9 billion this year, while its cost: income ratio dropping below 50%. It expects to continue repurchasing its shares and paying dividends to investors. 

Lloyds share price technical analysis

LLOY stock chart | Source: TradingView 

The daily timeframe chart shows that the LLOY stock price has pulled back in the past few weeks, moving from a high of 114.60p in February to the current 97.66p.

The stock is now hovering slightly above the 23.6% Fibonacci Retracement level. It has remained above the 50-day moving average.

The stock has also formed a bullish engulfing pattern, which is made up of a big bullish candle following a bearish one.

Therefore, the most likely forecast is where the stock rebounds, possibly to the key resistance level at 100p.  A move above that level will point to more gains to the year-to-date high of 114.60p.