Lloyds Banking Group (LSE:LLOY) shares have experienced a positive 2022 to date. What factors could affect the Lloyds share price this year and should I add the shares to my portfolio?
Lloyds share price rise
As I write, Lloyds shares are trading for 53p per share. In 2022 to date, the shares have risen from 47p to current levels. Lloyds shares have increased 47% over the past 12 months from 36p at this time last year to current levels.
Lloyds shares seem to be on an upward trajectory. I want to know what positive and negative factors could impact the Lloyds share price journey in 2022 and beyond. This will help me make a decision as to whether I would add the shares to my holdings.
Positives factors
Rising interest rates could boost the Lloyds share price. The Bank of England (BoE) raised its base rate last month after years of close to zero interest rates. At the moment, the base rate stands at 0.25%, up from 0.1%. There are also signs the rate could increase further in the future to curb inflation. When interests rate rise, net interest margins rise. This margin is the spread between higher lending rates and lower savings rates. A higher net interest margin rate means more income through net interest, which will boost profits.
Lloyds is the UK’s market leading mortgage provider. This means its fortunes are tied to the housing market. House prices surged massively in 2021 in the UK and show no signs of slowing down. It seems mortgage lending is back in fashion and this could benefit Lloyds’ bottom line and boost the Lloyds share price upwards.
Lloyds currently has a cash rich balance sheet. What better way to boost investor sentiment and share price than by offering investors increased dividends? Many firms cancelled dividends in 2020 and some have not resumed paying them even now. Lloyds is one such firm but dividend payments on the back of better performance could help the share price increase too.
Negative factors
Lloyds’ links to the housing market could also cause issues for the Lloyds share price and investment viability too. Rising inflation and cost could have an impact on existing mortgage loans. Could these so-called bad loans become a problem in the near future? If so, I think they could impact the share price and investment viability.
City analysts are projecting Lloyds shares to fall in 2022! They believe economic output will slow and hamper the banks, Lloyds included. When investing in shares for my portfolio I do my research and look at what educated analysts are saying too. Of course, forecasts can change based on future developments.
The pandemic is also a factor that could play a big part. New variants could rear their heads causing issues with economic growth and affecting Lloyds shares once more, as it did when the pandemic started.
Overall, I believe the Lloyds share price looks dirt cheap right now. There are factors that could boost the share price but at the same time other issues potentially around the corner that could have a negative impact. I would be willing to buy a small amount of the shares at current levels for my portfolio and keep an eye on developments.
Jabran Khan has no position in any 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.
