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

Like many of its peers, Lloyds will likely take a large hit to its bottom line from PPI related charges in its Q3 earnings on Thursday, but this is not the only thing likely to weigh on its performance this quarter.

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.

Looking to trade Lloyds and other UK bank stocks? Open a live or demo account with IG

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.

You can go long or short Lloyds with IG using derivatives such as CFDs and spread bets

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.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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