Lloyds Bank share price: Dead money walking, avoid

Lloyds (LON: LLOY) share price has been dead money this year. After soaring to a high of 51.46p in February, the company’s stock has dropped to about 43p. It has underperformed the performance of other UK bank stocks like HSBC and Standard Chartered. 

Headwinds remain

Lloyds Bank stock price moved sideways on Friday after the UK published strong economic numbers. Data by the Office of National Statistics (ONS) showed that the economy expanded by 0.2% in Q2 after growing by 0.1% in Q1. This growth translated to a year-on-year increase of 0.4%.

The expansion continued in June as the economy expanded by 0.9%, better than the median estimate of 0.5%. Additional numbers revealed that the country’s manufacturing and industrial production rebounded in June.

These numbers are important for Lloyds Bank, the biggest bank in the UK with over 26 million customers. In most periods, the bank does well when the economy is growing steadily.

Still, Lloyds Bank is facing numerous headwinds. First, deposits in UK banks have continued falling as the cost of living crisis continues. Data compiled by the FT showed that the big 4 banks had lost over 90 billion pounds in the past 12 months.

Some of these funds have gone to smaller banks or in money market funds as interest rates rise. Another headwind is that Lloyds and other banks have been forced to increase the interest paid to customers.

Further, British banks are under regulatory scrutiny following Nigel Farage issue with NatWest, which I covered here. 

The most recent results showed that Lloyds Bank’s profit after tax came in at 2.9 billion pounds and net income being at 9.2 billion. Its net interest income was 7 billion, helped by higher interest rates.

Is it safe to buy Lloyds Bank shares?

LLOYDS chart by TradingView

In an article I published earlier this year, I recommended that investors should stay away from Lloyds. First, a look at its historical performance shows that the company has underperformed the banking sector. It has jumped by 40% since 2009 while the SPDR Bank ETF has risen by over 260%. 

Lloyds is one of the banks that has never recovered from its Global Financial Crisis (GFC) crash in 2009. Historical performance is not an indicator of future trends. But in this case, Lloyds lacks a catalyst that will push its shares higher in the long term.

In addition, Lloyds share price has formed what looks like a double-top pattern, which is usually a bearish sign. This means that it has failed to move above the resistance point at 50p. Therefore, there is a likelihood that the shares will continue to underperform the FTSE 100 index in the near term.