Why I think this month could be critical for the price of Lloyds actions!

On February 20, when the bank was scheduled to publish its results for the year that ended on December 31, 2024 (FY24), I think the Lloyds banking group (LSE: Lloy) The price of shares will once again be attention.

Yes, it will be interesting to see if the banking giant's performance has exceeded the expectations of analysts. The average forecast of the 18 runners that cover the shares is for a rear to the £ 4.64 billion tax (FY23: £ 5.52 billion). After recent base rate cuts, they hope that the net margin of Lloyds (NIM) will be pressed. Its consensus of the fiscal year24 is for an NIM of 2.95% (FY23: 3.11%).

Motor Finance Problems

However, I am more interested in what the bank has to say about the ongoing review by the Financial Behavior Authority (FCA) in the possible incorrect sale of car finances.

In February 2024, the Bank made a provision of £ 450 million in its accounts to cover possible costs and compensation for customers.

Accounting standards require that said entry be made when “likelyWhich will result in an output of economic resources. This tells me that Lloyds directors believe that there is likely to have some financial fine. However, if Keefe's latest estimates, Bruyette & Woods (KBW) prove to be correct, it could be on the low side.

KBW has created a “conservative“Prediction that Black Horse Bank could end up paying £ 4.2 billion as a result of the 'scandal'.

I think this is important because we have seen how sensitive the price of bank shares has been.

On October 25, 2024, their shares fell 7.3% when the Court of Appeal said a ruling that Lloyds said. “It establishes a higher bar for the dissemination and consent of the existence, the nature and quantity of any paid commission of what had been understood or applied throughout the motor finance industry before the decision“

On the contrary, on January 21, the action increased by 4% when reports arose that the Government would try to express their concerns to the court that the case could undermine confidence in the financial regulation of the United Kingdom. Since then, the price of the action has increased by an additional 2.6%.

Time is everything

The FCA investigation and unparalleled legal cases have become a distraction.

It is a shame because analysts predict strong growth: they expect a profit of the FY27 after taxes of £ 6.04 billion. If made, the profits would be 30% higher than the consensus of the FY24. These 'experts' are predicting a 2027 dividend of 4.26p, an impressive yield of 6.8%.

Of course, much can happen in the next three years.

The bank obtains almost all its income from the United Kingdom. And the national economy is demonstrating to be fragile, which could affect profits and their dividend. Any increase in loan breaches will affect its final result.

However, in my opinion, the most pressing problem is FCA's research. Do not be misunderstood, I think the bank has the financial fire power to face a cost of £ 4.2 billion (or more). Fines and compensation are likely to be paid for several years. As of September 30, its balance sheet shows effective of £ 59 billion.

But in the short term, I suspect that the price of the shares will be under pressure if the provision increases. Therefore, if an investor sought to buy Lloyds shares, he would suggest that they consider waiting for the announcement of results before making a decision.