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Artificial intelligence platform Irithmics has indicated that investors in Lloyds Banking Group [LON:LLOY] shares are beginning to demonstrate a more long term appetite for Lloyds stock. In the shorter term there is still a strong negative bias, however, with traders either staying away from the shares altogether or shorting them.

Lloyds Bank artificial intelligence health check

Irithmics said that Lloyds investors had a relatively low sensitivity to news about Lloyds at the moment, indicating that they were no expecting many major surprises on the horizon for the bank.

Investor views seem to largely reflect the consensus forecasts from the broker community. HSBC reiterated its hold rating for Lloyds shares on 13 June, while both Barclays Capital and Morgan Stanley have reiterated overweight stances in the last two weeks.

Davy Research meantime upgraded its neutral to outperform expectations. It has been a long time since we saw any truly negative research, and that was from Bank of America Merrill Lynch back in mid-April. Price targets are sitting in the range of 67 (Goldman Sachs) to 80 (Barclays).

Meanwhile Lloyds Bank shares have closed today at 57 following a fairly extended drop from a high of just over 66p in mid April.

FCA announcement hits the banks again

Investors are less happy about the recent FCA announcement that the GBP 2.4 billion UK overdraft market is “dysfunctional” and punishes vulnerable customers. The FCA is pushing through some tough new reforms that will see the daily cost of an unarranged bank overdraft slashed considerably, as well as fixed fees for overdraft borrowing being banned completely.

This move will remove another easy source of revenue for the banks and will hit the bigger UK high street names like Lloyds and Royal Bank of Scotland [LON:RBS]. The new rules are expected to come into force in April 2020 and will represent another reason not to hold banking stocks.

For those who are faithfully holding Lloyds Bank stock in the hopes that it will come good and return to pre-financial crisis levels it represents yet more evidence that investing in banks as they stand today are like feeding dinosaurs.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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