The Lloyds share price has been a beneficiary of the Bank of England’s surprise pause in interest hikes last week but the direction for shares from here is less than certain.
The Lloyds share price is up around 10% from the September lows at 41p and has met the trend line to the downside started in February this year.
Investing in Lloyds shares in 2023 has involved the delicate balancing of the benefits of higher interest rates on Lloyds profitability with the damage higher rates are doing to their customers.
This has been reflected in the downtrend in Lloyds share price since the beginning of 2023 which looks unlikely to break before the end of the year.
With the Bank of England opting to keep rates on hold at last week’s meeting, Lloyds customers will enjoy some reprieve, but the bank’s key profitability metric, net interest margin, is now probably past the peak.
The bank themselves guided for a lower net interest margin in the second half of 2023 and a pause in interest rate hikes all but confirms this.
In addition, the UK housing market is starting to slow while key economic indicators deteriorate. Ultimately, provisions for bad debts are likely to increase through the rest of the year.
Unfortunately for Lloyds investors, there is very little on the immediate horizon which will make Lloyds look attractive at 45p.
There is of course the 5.4% dividend yield for income seekers but it is difficult to see the Lloyds share price above 50p in 2023.