What does 2025 hold for the Lloyds share price?

Lloyds’ share price could be in for a rocky ride next year as tough economic conditions and a fresh mis-selling scandal weigh on it, says Royston Wild.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Lloyds Banking Group (LSE:LLOY) share price has enjoyed strong gains in 2024. At 53p per share, it’s up 10.1% since 1 January.

But the FTSE 100 bank’s fallen sharply since the end of October. This negative momentum is a bad omen for existing investors heading into 2025.

Created with Highcharts 11.4.3Lloyds Banking Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL6 Apr 20203 Apr 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202120212022202220232023202420242025202520406080www.fool.co.uk

So what does the New Year hold for the Black Horse Bank? And should I buy Lloyds shares for my portfolio?

Should you invest £1,000 in Barratt Developments right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barratt Developments made the list?

See the 6 stocks

The new PPI scandal?

Let’s begin by exploring the recent drop in its share price.

You’ll probably remember the mis-selling scandal that rocked the banking industry during the 2010s. Firms were found guilty of wrongly selling payment protection insurance (PPI) on an industrial scale. Lloyds alone was on the hook for a jaw-dropping £21.9bn.

Today another mis-selling story is spooking investors, this time concerning the sale of motor finance. It’s early days, but investors fear another expensive scandal is brewing, one in which Lloyds is once again said to be a major player.

The Footsie bank set aside £450m to cover potential costs from a Financial Conduct Authority (FCA) investigation. But it’s put this under review following a recent court ruling: in short, this deemed commission from lenders to car dealers without customers knowing to be illegal.

RBC Bank analysts think Lloyds may have to cough up to £3.9bn in penalties. This would be small potatoes in comparison to the PPI scandal. Yet the problem isn’t going away soon, and estimates could continue to rise. This could keep Lloyds’ share price under significant pressure.

Trouble elsewhere

The car finance saga may be the biggest influence on Lloyds shares next year. But it’s not the only worry I have.

My other concerns include:

  • A combination of weak loan growth and rising credit impairments as the UK economy struggles.
  • Slumping net interest margins (NIMs) as the Bank of England cuts interest rates.
  • The threat posed by challenger banks and building societies to customer demand and margins.

There are patches of light amid the gloom, however. A steady housing market recovery is a good sign for Lloyds. The bank’s digital transformation initiatives should also continue to bear fruit.

But on balance, I think Lloyds and its share price could face a tough time in 2025.

Here’s what I’m doing

That’s not to say that City analysts currently share my pessimistic take. The 18 number crunchers with ratings on the bank have slapped a 12-month price target of 64.94p per share on the bank.

That represents an 22% premium to current levels.

Yet on the other hand, those 18 analysts are hardly spinning cartwheels over Lloyds. Ten have slapped a Hold rating on the firm. One considers it to be a Sell. Only seven believe it to be a Buy.

This matches the broader market’s lukewarm view of the bank, as reflected by its rock-bottom valuation. A forward price-to-earnings (P/E) ratio of 8.1 times is well below the FTSE 100 average of 14.3 times.

I believe the market and the City may take an increasingly bearish view of Lloyds, which in turn could push its share price sharply lower.

All things considered, I’d rather buy other cheap UK shares right now.

Should you buy Barratt Developments shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »

Investing Articles

At a 52-week low but Taylor Wimpey shares are forecast to rise 35% in a year and yield almost 9%!

Taylor Wimpey shares have had a rough ride but Harvey Jones says analyst forecasts are upbeat, while there is also…

Read more »

Investing Articles

As copper prices surge, Glencore shares are a steal at 270p

Andrew Mackie believes the extraordinary dislocation occurring in copper markets will be very supportive for the Glencore share price.

Read more »

Investing Articles

2 cheap shares to consider as Trump shocks markets

Dr James Fox examines several cheap shares, on paper at least, as markets experience a broad sell-off in reaction to…

Read more »