Is it time to buy Lloyds shares ahead of Q1 results?

Lloyds Banking Group bounced off its two-month support line and looks technically bullish ahead of Wednesday’s first quarter interim management statement.

The banking group, which consists of the Bank of Scotland, Halifax and Scottish Widows, amongst others, is widely regarded as a good proxy for the UK economy because of its 30 million customers and exposure to British consumers.

With UK house prices continuing to steadily rise despite headwinds such as soaring inflation, rising interest rates and the cost-of-living crisis, the UK’s biggest mortgage lender should continue to benefit from this growth.

Furthermore, the Lloyds share price is likely to be boosted by its new venture called Citra Living with the bank trying to buy 10,000 homes by 2025 and 50,000 over the next decade. This would make it the UK’s largest landlord with a £4 billion portfolio, larger than the current biggest, Grainger, which has a portfolio of just over £2 billion.

Under its new CEO Charlie Nunn, the bank announced it is going to start expanding its wealth management and investment banking divisions which will give it more international exposure and additional sources of income.

According to Reuters, Lloyds Banking Group first quarter pre-tax profit is expected to come in at £1.5 billion, down from £2.07 billion in quarter one (Q1) 2021.

Year-to-date the Lloyds share price has underperformed the FTSE 100 and is currently down by around -6.5% compared to the FTSE 100’s -0.8% but compared to a year ago the share has been outperforming the index by around 2%, increasing by 8.75% since 26 April 2021.

When considering that the Lloyds price-to-earnings ratio (P/E) comes in around 6 and is thus considerably lower than the FTSE 100’s average of 15, the share is fundamentally undervalued, despite it boasting a healthy 4.3% dividend yield which is again above the FTSE 100 average.

What does the technical picture say?

The fact that the Lloyds share price held steady in the past week, despite the FTSE 100 taking a 3% hit due to ongoing demand concerns regarding the one-month long Covid-19 lockdown in Shanghai and worries about supply chains out of China affecting the UK economy, is encouraging for the bulls.

Today’s Bullish Engulfing pattern on the daily candlestick chart, where today’s bullish candle ‘engulfs’ yesterday’s bearish candle, should it continue to do so at today’s close, could lead to the 2022 downtrend line at 47.60p soon being revisited.
Be that as it may, provided that this week’s low at 45.08p underpins, the bulls should remain in control with the March high at 49.17p and the minor psychological 50p mark being targeted.

While the early April low at 43.42p and the December 2021 low as well as the 200-week simple moving average (SMA) at 43.02p hold, the January and February highs at 52.90p to 54.31p may be reached in the weeks ahead.

Failure at 43.02p would push the March low at 36.98p back to the fore, though, and also target the June 2020 high at 35.90p.