Will Lloyds’ share price vaccine rally continue or fizzle out?

Lloyds shares have soared 21% over the last week, with investor optimism returning in the wake of the reported 90% efficacy of Pfizer’s Covid-19 vaccine and analysts at Credit Suisse believing bank’s dividends will return in 2021.

  • Lloyds share price soars 21% on Covid-19 vaccine hopes
  • UK banks set to see dividend ban dropped after Covid-19 vaccine news, says Credit Suisse
  • FTSE 100 weakens as investors take profits, but further are likely, says IG analyst

Lloyds share price has soared 21% over the last five trading sessions, with UK stocks benefitting from Joe Biden winning the US presidential election last week and the reported 90% efficacy of Pfizer’s Covid-19 vaccine.

The lender is also expected to have the best chance for a re-rating and see its shares climb even higher if a coronavirus vaccine does manage to make it to market in the coming months, according to analysts at Credit Suisse earlier this week.

Lloyds is trading at 33p per share on Thursday, with the stock down 47% year-to-date.

Lloyds and other UK lenders likely to see dividend band reversed

Analysts at the Swiss investment bank also said that the Bank of England (BoE) will likely provide an update on their dividend bans in December now that a Covid-19 vaccine could see Europe returning to some semblance of normality by the spring.

‘Even in the absence of a vaccine, we think the blanket ban will likely be dropped in 2021, albeit dividend payments could be delayed until mid-year so as be informed by stress tests,’ Credit Suisse said in a note on Tuesday.

‘With a successful vaccine, we think regulators will be more willing to allow banks to pay a normalised dividend for 2020, as well as some catch-up for 2019.’

The BoE advised UK banks to suspend their pay-outs to shareholders earlier this year to ensure that lenders were adequately capitalised to support British businesses recover from the economic fallout from the Covid-19 pandemic.

FTSE 100: technical analysis

The FTSE 100 has weakened overnight, leading to the negative open we are seeing this morning, according to Josh Mahony, senior market analyst at IG.

‘Given the substantial gains we have seen of late, this is somewhat unsurprising,’ he said. ‘Nevertheless, the trend remains intact for now, with a break below 6103 required to bring about a more bearish outlook.’

‘Until then, further gains are likely, with the current pullback looking like a temporary retracement,’ Mahony added.

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