Over the past year, the Lloyds (LSE:LLOY) share price is up an impressive 68%. However, over the past six months, shares have traded in a much more stagnant manner. In fact, they are only up 6% over this period. With the share price constrained to a tight range between 42-49p, we struggle to see a real conviction to buy shares in the most traded FTSE 100 company.
Lackluster following results
Lloyds shares are frequently included in the most traded FTSE 100 shares by volume each day. So it’s clear that the lack of movement in the share price recently isn’t down to a lack of trading. It shows that sentiment is broadly flat, in that neither buyers nor sellers are winning out. This in itself is very telling for someone that is sitting on the sidelines.
I thought that H1 2021 results that were released earlier this summer were positive. Versus H2 2020, net income was up 8%. Thank to lower restructuring costs, profit after tax came in at £3.8bn vs £1.4bn last half-year. This is an impressive bounce back, aided by lower credit impairment charges and a brighter post-Covid outlook.
However, the results weren’t enough to boost the Lloyds share price materially above the 50p resistance level. One point that can be attributed to this is the steadily declining net interest margin that the bank has. It stands at 2.50% but has been falling, largely due to the catch up from cuts to the base rate from the Bank of England last year.
Ultimately, lower interest rates makes it harder for the bank to make a spread between the money it lends out versus the money it borrows. unfortunately, I don’t see interest rates moving significantly higher for several years. This means that pressure on the net interest margin is likely here to stay for Lloyds.
Better options elsewhere
The lack of volatility means that the Lloyds share price isn’t something we would look to actively trade. We would rather look to stocks that are heavily sold short in order to find potential large short-term moves. However, what about as a long-term investment?
Even from this angle, I struggle to see value. As an income investor, the resumption of a dividend this year is a positive. Yet the yield is below the FTSE 100 average. There are better dividend shares out there at the moment.
For capital growth, again the recent performance doesn’t inspire us. The performance over the past year looks strong, but some of this is simply the bounce back from the stock market crash last March. There isn’t much firm specific movement that has outperformed other peers in the index.
On balance, I wouldn’t buy shares with where the Lloyds share price is currently.