A little over a month ago, I was confident that Lloyds Bank (LSE: LLOY) was on its way back up. In today’s trading, the Lloyds Bank share price reached 50p, the level I had predicted.
Why I expected the Lloyds Bank share price to rise
My argument was based on the momentum recently seen in its share price. A positive earnings report, improving economy, and its own bullishness were the reasons I expected to see these gains.
Specifically, I had said that this was possible in a matter of months, if not less. It has taken just a month and a few days. In fact, it was so increasingly evident to me that it would cross 50p soon, that by mid-May I had said that it could now head to the 60p mark.
The next important question
These short-term price targets are helpful to me as an investor to understand the share better. At the same time, we at the Motley Fool are interested in a long-term answer.
The question to which is: Can the Lloyds share price continue to generate capital gains for me over time?
I think it is important to ask this question right now more than at any other time I have tracked the stock. This is because until last year, Lloyds paid a hefty dividend. This meant it was a somewhat attractive stock despite its weak share price trend.
But last year, the Bank of England asked banks to first stop paying dividends and then allowed them only cautiously. As a result, the Lloyds dividend yield is low. So if its share price does not continue to rise, I just do not see any reason to buy the share.
There is much hope
I am hopeful though. The regulator hopes that the “guardrails” as they are called, will be there for only some time. Lloyds’ and other banks’ latest healthy results only encourage this idea further. As do the BoE’s optimistic projections for economic growth. This means that not only can it start paying dividends, its share price can continue rising too.
But also a catch
But here is a catch.
House prices are still elevated, but BoE’s numbers from earlier today show a sharp fall in home loans in April compared to the month before.
Lloyds is the country’s biggest lender in the category, so I would watch this trend going forward. This is important because the stamp duty holiday gave a big push to the housing market in an otherwise poor year. And it will start getting withdrawn from the end of June.
My takeaway for the Lloyds Bank share price
I think the next update from Lloyds is an important one. It will give a real insight into the bank’s performance after the economic wheels start turning again. It might also give guidance to help in making an assessment of its future.
As I said in my last article on the bank, I will wait for another update before making a call on the Lloyds share price.
