Lloyds Share Price Prediction: LLOY Inches Up But Will Struggle Below 60p

UK banking giant, Lloyds continues to struggle for momentum and fell behind peers like Barclays and NatWest late last year. The company is under pressure due to its oversized exposure to potential compensation claims emanating from the vehicle financing scandal. Lloyds share price has risen by 1.5% in the last five sessions, bringing hope that it could stay buoyant amid a motor finance scandal.

Motor finance scandal to continue rocking Lloyds share price for the foreseeable future

The compensation claims could reportedly cost UK’s financiers up to £23 billion. Lloyds set aside £450 million to settle the claims, but that figure could rise much higher. This isn’t the first time the bank has suffered compensation claims of such magnitude.

It is barely four years since it completed compensating customers affected by the infamous Payment Protection Insurance (PPI) scandal, an insurance mis-selling scandal that cost the bank over £20 billion in compensation claims. Therefore, investors will likely take a measured approach to buying Lloyds Bank stock until the magnitude of its exposure to the vehicle finance scandal becomes clear.

A weaker UK economy adds pressure

That will likely weigh down on Lloyds share price and could also affect its ability to pay dividends. Also, the UK’s troubled economy could exacerbate the situation for Lloyds (LON: LLOY). The world’s sixth-largest economy contracted in the third quarter of 2024 and is likely to have stagnated in the fourth quarter. That has affected the housing market, a segment in which it is the largest mortgage lender via its Halifax subsidiary.

The Halifax House Price Index contracted by -0.2% month-on-month in December, lower than the forecast figure of +0.8%. However, despite its recent troubles, Lloyds Bank has a solid bottom line and reported forecast-beating profits in the last three quarters.

Also, as UK’s inflation remains sticky, the Bank of England will likely keep interest rates elevated. That could help banks safeguard their current net interest margins, which could add support to Lloyds Bank share price.

Lloyds share price prediction

Pivot: Lloyds share price pivots at GBX 53.70 and the momentum will be towards the upside if price action stays above that level. Conversely, a break below that level will shift the momentum to the downside.

Resistance: Initial resistance at GBX 55.82. Secondary resistance is likey to be at GBX 56.54.

Support: Primary support is likely to be at GBX 54.40. Breaking below that level will invalidate the upside narrative. An extended control by the sellers could see LLOY price test GBX 53.70.