Lloyds (LON: LLOY) share price had a strong performance in November as stocks rebounded. The stock surged to a high of 47.38p, which was the highest level since September 22. In total, the stock rose by more than 22% from its lowest level in October.
UK recession risks
Lloyds Bank is one of the biggest British banks in the UK with more than 26 million customers. It has vast operations in the retail and commercial banking industry. In particular, the firm has the biggest market share in the mortgage industry in the UK.
Therefore, the company is often seen as a proxy for the British economy. It does well when the UK is doing well and vice versa. This explains why the bank allocated more money in provisions for bad loans than other firms like Barclays and HSBC.
The most recent results showed that the company’s profits dropped by 26% in the third quarter to £1.5 billion. Analysts polled by Reuters were expecting that the bank’s profit would rise to £1.8 billion. The firm allocated £668 million in provisions for bad debt, which was double that what the bank was expected.
These results show the mixed impact of the rising interest rates. On the one hand, higher rates have led to robust net interest income. At the same time, these rates have led to a significant contraction of the British economy, which has made life difficult for most people.
Lloyds Bank was also affected by Kwasi Kwarteng’s mini-budget that led to major volatility in the UK. In particular, it was exposed to financial products known as reverse repo, where the bank lends funds to pension funds through their treasuries and takes government bonds as collateral. These reverse repo agreements pose a major risk for the bank in the future.
Lloyds share price prediction
LLOY chart by TradingView
So, is it safe to buy Lloyds shares in December? The 4H chart shows that Lloyds stock price has been in a strong bullish trend in the past few weeks. As it rose, the stock managed to move above the resistance level at 46.98p, which was the highest point on October 5. It also rallied above the upper side of the ascending triangle pattern shown in black.
The Relative Strength Index (RSI) has been in a strong bullish trend. Therefore, the stock will likely keep rising in December as buyers target the key resistance at 50p.
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