What will it take to get the Lloyds share price climbing again?

As a Lloyds Banking Group (LSE: LLOY) shareholder, it’s a question I often ask myself. What will it take to get the Lloyds share price climbing again?

I know Lloyds shares have gained 30% over the past 12 months. But they’re still below their pre-pandemic price, and 25% down over the past five years.

I keep thinking the next set of results will get the shares moving. But time after time, I’m disappointed. I see even less reason now to continue with the same hopes, after reading of Barclays’ expectation-busting Q4 figures.

Profit in the quarter more than quadrupled, with full-year net profit reaching a record £6.3bn. And the bank released more reserves it had set aside against bad loan potential as a result of the pandemic.

In addition, Barclays revealed a 6p per share dividend for the full year. On the current share price, that’s only a modest yield of 3.1%. But I see it as excellent progress as we head away from the Covid years.

Unenthusiastic reaction

Did the Barclays share price soar on the news? No. We just saw a gentle improvement.  The mediocre response is probably due to the quarter’s figures being boosted by one-offs. And investment banking revenues dipped. So how might all of this reflect on Lloyds?

Well, Lloyds brought us a promising Q3 update. And I expect full-year results to reflect similarly improving fortunes to Barclays. I also hope to see similar dividend progress. Lloyds, meanwhile, is not exposed to the investment banking business, so there will be no performance disappointment there. 

Long-term outlook

But I do think investors are moving away from short-term hopes for the Lloyds share price, and are looking at the wider economic picture. And our post-Brexit future is still very much uncertain, even without the two-year pummelling handed out by that virus.

I remain convinced that Lloyds is still a good long-term investment. But what do I think it will take to get it back into investors’ good books?

I can’t help thinking we’ll need to get beyond our current topsy-turvy state of economic growth, inflation and interest rates. Short-term growth has been strong, but coming out of period of contraction that’s nothing special.

Higher interest rates should certainly help Lloyds. But the Bank of England (BoE) is being understandably careful not to raise them too high too soon. We really don’t want to choke off those first shoots of economic recovery.

Lloyds share price uncertainty

I reckon we’ll need to regain some degree of clarity. And I can’t see that happening until economic growth reaches a sustainable post-pandemic outlook, inflation settles into its new trend, and the BoE can see enough to know where medium-term interest rates really should be.

And for Lloyds specifically, I want to see what a sustainable and progressive dividend is going to look like.

I think that could easily take another year. And I envisage gradual gains in the Lloyds share price rather than any strong bull phase. There’s plenty of risk investing in Lloyds right now, for sure. But I see that risk subsiding over the longer term.

Alan Oscroft owns Lloyds Banking Group. The Motley Fool UK has recommended Barclays and 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.