Lloyds share price: 3 things to consider ahead of Q2 results

• Lloyds Banking Group PLC (LON: LLOY) share price is up by 32% so far in 2021
• UK’s third largest bank is due to release its second quarter and half-year 2021 results on Thursday (29 July 2021)
• Analysts are expecting an uptick on the group’s Q2 performance
• Looking to trade Lloyds shares? Open an account with us today to get started.

UK financial institution Lloyds Banking Group is scheduled to report its second quarter and half-year results for the 2021 financial year, before the market opens on Thursday (29 July 2021).

Below are some things for investors to consider ahead of the earnings release.

1. LLOY's stock price soars on improved outlook

Shares of Lloyds, UK’s third largest bank by market capitalisation, have risen over 32% so far this year, as the country’s economic outlook improved with nearly 60% of the population having received two doses of a Covid-19 vaccine.

The stock currently has a ‘buy’ rating from nine out of 11 analysts and a consensus price target of £50.44, according to the latest data published by MarketBeat.

The price target represents a potential 9.4% upside from LLOY’s latest price of £46.12.

The most recent investment case came from Deutsche Bank analyst Robert Noble, who gave a ‘Catalyst Call: Buy’ rating on the bank on 23 July 2021, while naming it as a short-term investment idea.

Earlier this month, UBS also kept a ‘buy’ recommendation on the bank, while raising its price estimate to £54 from £51 previously.

2. The group raised its guidance for 2021

Following its ‘solid’ financial performance in the first quarter, the group enhanced its earnings guidance for 2021.

Lloyds is now expecting - based on its economic assumptions as of end-April - for net interest margin to be in excess of 245 points, operating costs to fall to roughly £7.5 billion, net asset quality ratio to come in below 25 basis points, and statutory return on tangible equity to end up between 8% and 10%.

Full year impairment charge is also expected to be ‘materially lower’ than the guidance set out at the end of 2020, thanks to a £459 million release of expected credit loss and other benefits recognised in Q1.

Finally, the group said it was ‘accruing dividends’ with the ‘intention to resume its progressive and sustainable ordinary dividend policy’. This is a key point to watch, with the Bank of England having fully removed restrictions on UK banks' dividend payouts on 13 July.

Meanwhile, Deutsche Bank’s Noble predicted that Lloyds’ Q2 earnings will improve as a result of stronger pre-provision profit growth and better-than-expected capital generation.

3. Lloyds’ net interest income fell 9% in Q1

The group's statutory profit before tax for Q1 2021 was 140% higher year-on-year at £1.9 billion. It attributed the improvement to solid business momentum and a net impairment credit as a result of the UK's improved economic outlook.

Underlying profit was £2.07 billion, compared to £558 million in the first three months of 2020, which reflected the improved impairment outcome and lower total costs.

Trading surplus is recovering at £1.75 billion, down 12% compared to the first three months of 2020, but up 21% from Q4 of 2020.

Net interest income of £2.7 billion was down 9% year on year, impacted by a reduced banking net interest margin of 2.49%, in line with the lower rate environment.

Feeling bullish or bearish about Lloyds? Take a position on the stock today.

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*Based on revenue (published financial statements, 2022).