Will the Lloyds and Barclays share prices ever stop dropping?

Lloyds and Barclays have seen their shares plummet more than 45% since the start of the year, with the pair finally seeing signs of support on Tuesday. But have the pair stopped dropping or will they continue to fall further?

Lloyds and Barclays shares have lost close to 50% of their value since the start of the year, with the pair finally seeing signs of support on Tuesday, climbing 7% during the session.

However, with the coronavirus outbreak wreaking havoc on the global economy, both are likely to fall further in the weeks ahead.

But despite both stocks value likely to decline in the near-term, the pair both boast a dividend yield of around 10% and relatively low price-to-earnings ratios – making them inexpensive for investors.

Lloyds and Barclays closed at 32p and 93p respectively on Tuesday.

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Covid-19 will continue to impact Lloyds and Barclays

The coronavirus outbreak has brought the UK economy to a halt, with economists forecasting it could shrink by as much as 14% in the first half of 2020.

Lloyds and Barclays will likely feel the impact of Covid-19 well into the second half of the year, with quarterly earnings likely to take a significant hit. Another factor driving both banks shares down is that it is still unclear how long coronavirus-driven lockdowns will last.

Margins at UK lenders are under even more pressure prior to the outbreak, with the Bank of England (BoE) lowering interest rates to just 0.1% - the lowest in the Bank’s 325-year history.

In a recent report by Bloomberg, UK economist Dan Hanson said that the actions taken by the BoE and the Treasury could help the country’s economy bounce back in the second half of the year, so long as the outbreak is contained by the summer. However, that forecast is based on the government imposing a four-week lockdown in April to stop the spread of the virus.

‘The duration of containment measures is the biggest uncertainty in our forecast,’ Hanson said. ‘In a more severe scenario, which includes a six-week lockdown, that number is closer to 14%. Clearly, if measures drag on into the second half, the costs will be huge.’

‘The difficulty getting money to the right people and companies means, even after a sharp rebound, some demand weakness could linger in the second half,’ he added.

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