Can Lloyds shares climb higher in 2022?

Lloyds shares have had a successful year, delivering 33% year-to-date returns. Can the shares continue to climb throughout 2022? Dylan Hood investigates.

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Lloyds (LSE: LLOY) shares have delivered some solid returns for investors this year. Having seen 33% year-to-date returns, the shares are currently trading at 46p. However, this is still over 25% lower than its pre-pandemic share price. With exciting growth plans in place for the next few years, I think Lloyds stock could see some great growth throughout 2022.

Expansive plans

In August, Charlie Nunn took over leadership of the firm and he’s since announced major growth plans. The new strategy looks to enhance the firm’s stake in property, wealth, and commercial and investment banking. This comes after encouraging third-quarter revenues that beat forecasts by over 50% and have led to the firm sitting on over £4bn in capital.

Nunn has suggested that a portion of this capital might be spent on expanding the budget for Citra Living, Lloyds’ private landlord company. Quadrupling the budget from £250m to £1bn will vastly speed up the process of Lloyds becoming the UK’s largest private landlord. This could be a great move for the firm moving forward.

Lloyds is already the UK’s largest mortgage lender and second-largest credit card provider. Therefore, I think expanding different parts of the business seems smart if the firm wants to expand its domestic market share. In addition to this, plans to expand overseas business have also been considered, with the firm exploring the possibility of opening a New York branch. Such a presence could allow the firm to compete against larger, more international firms such as HSBC.

In addition to this, as my fellow Fool Charlie Keough pointed out, the next Monetary Policy Committee meeting is being held on 16 December. To combat inflation — which has been steadily climbing over the past few months — a hike in interest rates is expected by many investors. If this is the case, Lloyds will be able to charge more on its mortgage loans. This will help build upon the firm’s already strong revenues.

Risks for Lloyds shares

One risk that could continue to plague Lloyds shares’ growth is the Omicron variant. The shares fell by over 7% on 25 November when news broke of the variant. This is because of the threat it poses to the UK economy. If more lockdowns occur, they could seriously hamper the growth of the shares.

In addition to this, although Lloyds is beginning to speed up growth in international business areas, it is still substantially behind some of its competition. Such a heavy domestic focus led the firm to be very closely tied to the UK economy. If the UK economy underperforms, so might Lloyds shares.

And of course, its growth plans come with risk too. Entering the rental sector and possibly opening a New York branch aren’t guaranteed to succeed.

The Verdict

Although Lloyds shares are subject to Omicron threats, for me, the positives outweigh the risks. New leadership and expansive plans seem very encouraging. If these plans come to fruition in 2022, I expect Lloyds shares to climb higher. As such, I would consider adding them to my portfolio going into 2022.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dylan Hood has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings 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.

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