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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.

Looking to trade Lloyds and Barclays? Open a live or demo account with IG today.

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.

You can go long or short Lloyds and Barclays with IG using derivatives like CFDs and spread bets.

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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