Lloyds share price: 3 things to watch out for ahead of its Q3 results

Lloyds will unveil its Q3 earnings on Thursday, with investors expecting Payment Protection Insurance (PPI) related charges to put a significant dent in its bottom line.

However, it is not the only thing likely to weigh on the bank’s performance this quarter and certainly not the main area of focus for investors ahead of its Q3 results.

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PPI charges will hit Lloyds profits hard

PPI charges are expected to make a big dent in Lloyds profits when it unveils its Q3 results on Thursday.

In fact, analysts at Citi expect the bank’s PPI bill to come in at £1.55 billion, resulting in the lender reportinh pre-tax profit of £500 million in its third quarter.

Thankfully, the PPI claim deadline passed on August 29. However, the bank was forced to suspend its share buyback programme in September after warning investors that compensation costs in Q3 will be between £1.2 billion - £1.8 billion – bringing Lloyds total PPI bill to £26 billion.

Lloyds faces uphill battle amid challenging market conditions

Putting PPI aside, Lloyds and other UK lenders are still weighed down by a myriad of headwinds, including a highly competitive mortgage market and a prolonged low interest rate environment that is squeezing net interest margins.

UK banks are also struggling to keep operating costs down leading many lenders to cut thousands of jobs, while growth is being hindered by a slowdown in global economic activity amid Brexit uncertainty and the ongoing US-China trade war.

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Lloyds share price remains resilient

Despite the challenges it faces, Lloyds share price has performed well this year, up 14% since the beginning of January.

Its success is owed, in part, to Lloyds successful pivot towards retail banking, with the lender well-positioned to generate attractive returns for shareholders under this strategy.

However, with the bank so focused on retail, its performance relies on the strength of the UK economy, which continues to be hampered by Brexit uncertainty.