Lloyds share price just sank into a correction: is it safe to buy the dip?

Lloyds share price has suddenly moved into a technical correction after falling by ~15% from its highest point this year. It was trading at 98.28p on Thursday, down from the year-to-date high of 114.65p. So, has the blue-chip bank stock become a bargain?

Lloyds share price crash mirrors that of European banks 

A closer look shows that Lloyds is not the only bank stock that’s crashing recently. NatWest, a similar company that runs the Royal Bank of Scotland and Coutts, has retreated to 594p from the year-to-date high of 705p.

Barclays stock has dropped to 430p from its all-time high of 500p. Standard Chartered, a company that largely focuses on the emerging markets, also retreated to 1,700p from 1,918p in the first week of February. HSBC shares have also retreated in London and Hong Kong.

The ongoing bank stock sell-off is not limited to London alone as some of the top European companies have also retreated. Unicredit, Deutsche Bank, Societe Generale, and BNP Paribas are also in the red.

Therefore, the ongoing Lloyds stock crash is not because of its weakness. Instead, it is happening as investors book profits after a spectacular bull run. Investors are also wondering whether the good times will continue for a while, as the banking sector tends to be highly cyclical.

MFS collapse is having an impact on banks stock retreat

The stock has also dropped as investors assess the recent collapse of Market Financial Solutions, commonly known as MFS. The company collapsed recently amid accusations of fraud, including double-pledging of assets. While Lloyds is not exposed to the crisis, other companies like Jefferies, Barclays, Apollo Global Management,  Macquarie, and Elliot Management have been.

Historically, when such large collapses happen, investors start to question whether there will be more collapses in the future, a situation known as systemic risk. 

Additionally, there are concerns about the UK economy as the war in the Middle East continues. A major risk is the soaring energy prices in the UK, which may make inflation stickier and economic growth more benign. 

On the positive side for Lloyds, sticky inflation may make it difficult for the Bank of England (BoE) to cut interest rates. Higher interest rates would be positive for Lloyds and other banks.

The stock has retreated after the recent financial results. The company said that its profit before tax rose to £6.6 billion from £6 billion in the previous year. Its underlying net interest income rose by 6% to £13.6 billion.

The company also announced a big share buyback of over £1.75 billion. It brought its total capital returns in 2025 to over £3.9 billion.

The company expects the underlying net interest income of £14.9 billion, while its return on tangible equity of 16%.

City analysts believe that the net interest income will then jump to £16.1 billion in 2027 and £16.9 billion in 2028.

Lloyds stock price technical analysis 

The daily chart reveals that the LLOY stock price has crashed in the past few months. It has tumbled from a high of 114.65p in February to the current 98p. It is hovering near its lowest level since January 5. 

On the positive side, there are signs that the stock is forming an island reversal pattern. This pattern happens when an asset consolidates after forming a gap. As such, there is a likelihood that the stock will bounce back in the near term. 

This rebound will happen as investors buy the dip. If this happens, the next key level to watch will be at 110p, which is about 13% above the current level.