Lloyds (LON: LLOY) share price drifted upwards on Wednesday even as concerns about the UK banking industry rose. The shares rose to a high of 42.91p, higher than this week’s low of 40.80p.

Lloyds Bank stock rose slightly even as the UK published weak economic numbers. The data revealed that the country’s economy contracted by 0.5% in August after it expanded by 0.5% in the previous month. The Office of National Statistics attributed the contraction to weather patterns during the month.

As I have written before, economists view Lloyds Bank as a good barometer of the British economy. For one, it serves more than 25 million people and is the biggest mortgage provider in the country. 

Therefore, there are concerns about Lloyds Bank as the economy softens. For example, data published by the Bank of England (BoE) showed that delinquencies in the mortgage industry jumped in the second quarter as interest rates rose.

Now, the biggest news in Corporate UK is that Viking Global, a huge hedge fund with more than $41 billion in assets under management, has shorted the company. Viking was founded by Andreas Halvorsen, a protege of Tiger Global’s Julian Robertson.

By shorting the company, the hedge fund aims to benefit as the Lloyds share price slips. The company believes that Lloyds will struggle as many people in the country find it difficult to pay back their mortgages. This report was first reported by Bloomberg, which cited a person with knowledge of the matter.

The Bank of England (BoE) has hiked interest several times in a bid to fight the elevated inflation. These rate hikes have helped to push the average five-year mortgage rate to almost 5%, the highest level in years.

Higher interest rates have benefited banks like Lloyds by pushing their interest income higher. However, they have also led to an uptick in delinquencies, a situation that could worsen in the coming months.

Regular readers know that I am not a big fan of Lloyds Bank stock, as I have written here and here. My argument has always been that the stock has been a perennial underperformer for more than a decade. Also, I have argued that the company lacks a clear catalyst that will push its stock higher.

The daily chart shows that the Lloyds share price has been in a strong bearish trend after peaking at 51.41p in February. It remains below the descending trendline shown in black. Also, it has moved below the 25-day and 50-day moving averages.

The stock has also formed a descending triangle pattern. Therefore, the outlook for the stock is still bearish, with the next key support level to watch being at 40p. This view will be confirmed if it drops below the support at 41.70p.

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