Why the Lloyds share price has soared 40% in November

first_imgSimply click below to discover how you can take advantage of this. Image source: Getty Images Our 6 ‘Best Buys Now’ Shares TomRodgers has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Long-suffering FTSE 100 investors have had a serious boost from high street favourite Lloyds Banking Group (LSE:LLOY) in November 2020. The Lloyds share price is up 40% this month alone. So is it all simply down to more positive market sentiment from news of potential Covid-19 vaccines? Or is there something deeper going on here?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Down in the dumpsIn mid-September this year the Lloyds share price had sunk close to its lowest level since November 2011 at under 24p. The outlook appeared bleak, to say the least. The bank had already lost 55% of its value in 2020. And the double threat of Brexit and the pandemic weighed heavily against any positive momentum. The short sellers started circling. So the $49bn London-based hedge fund Marshall Wace laid a record £100m bet against the FTSE 100 stalwart, adding extra pressure to the Lloyds share price. When investors or traders take out a ‘short’ position, they are betting that the share price of a company will fall further. If that result comes true, the short seller makes a profit. This kind of action carries large risks and so is usually the preserve of professional day traders. But if the Lloyds share price was to recover, for example, the hedge fund would lose a lot of money very quickly.  Elsewhere in the market, investors had their cautious hats on. And so there was no new money coming in to snap up the super-cheap Lloyds share price. Lloyds share price profitAt the end of October 2020 that all changed. The bank released a Q3 update covering the first nine months of the year. What came out of it lit a fire under the Lloyds share price.  Lloyds had returned to profit. Pre-tax profits of £620m, to be precise. It could hardly have come at a better time. In the previous quarter’s Q2 results, for the three months to the end of June, Lloyds posted a massive loss of £676m. Not only was it a significant financial hit, it was also hundreds of millions worse than City analysts expected. So the share price crumbled once again. The main reason the bank cited was that it was forced to put aside £2.4bn for bad debts due to “significant deterioration in the economic outlook”. Along with worsening sentiment came the notion that many more businesses would fail to pay back debts owed to the bank. And so, while it wasn’t all good news in the October update, with pre-tax profits still £1.94bn lower than in the same period in 2019, it was good enough.Capital gainsLloyds also added that its capital position was much improved. Its Common Equity Tier One capital (CET1) rose to 15.2% from 13.8% at the start of the year. This might sound like an arcane point, but it is particularly important. Since the end of the great financial crisis and the banking collapse of 2008-09, banks have had to abide by strict regulatory rules and keep enough capital on hand to withstand severe financial stress. Banks must maintain a minimum CET1 ratio of 4.5% as well as keeping a 2.5% extra ‘buffer’ on hand. So this strengthened position wasa sign of even stronger confidence that the bank — and hence the Lloyds share price — could ride out the worst of Covid-19 and return to business as usual on the other side.  I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. 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Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Tom Rodgers | Tuesday, 24th November, 2020 | More on: LLOY Enter Your Email Address Why the Lloyds share price has soared 40% in November See all posts by Tom Rodgerslast_img read more