As a shareholder, I guess I’m a bit biased in favour of the Lloyds Banking Group (LSE: LLOY) share price.
At just 53p, and on another slide after 2024’s gains turned tail in October, it just looks too low to me. And you know who else thinks the same? The current crop of analyst forecasts predict good days ahead for Lloyds shares.
One of them, at Deutsche Bank, has even pinned an 80p target on the shares.
Price targets
If that comes off, it could mean a 50% gain from today. And it might even propel Lloyds to the top of the FTSE 100 leader board in 2025.
Not all brokers are quite as optimistic as that though. Updated price targets in the last few months of 2024 were mostly in the range of 58p to 62p. And the overall broker stance is mediocre, with just a slight sway to the Buy side of things.
The City isn’t wildly optimistic overall. But the low end of the target range is at 53p, so at least nobody’s predicting a Lloyds share price fall. And that lowball price is from early 2024.
Rising sentiment
The more recent range, prior to the Deutsche Bank update, suggests the shares could gain between 9% and 17%. If Lloyds achieves that in 2025 on top of paying a forecast 5.4% dividend, I’d rate it as a fine result.
And if broker sentiment keeps on improving (and they’re right), we might even do better than that.
What would it mean for the Lloyds share price valuation? An 80p price would give us a price-to-earnings (P/E) ratio of around 12.
That’s based on earnings expectations for the 2024 year just ended, with results due on 20 February.
Fair price?
In my view that could be too expensive right now, in a year in which UK bank valuations are still under pressure.
Falling interest rates, should the Bank of England cuts actually continue in 2025, would be a bit double-edged. Yes, they could cut interest margins. But they’d surely also boost mortgage lending. I’m not overly worried about that.
But Lloyds’ involvement in the current car loan mis-selling investigation is a concern. The board has so far set aside £450m for it. But pessimists suggest it might cost Lloyds up to £1.5bn.
I really want to see what the board says about it at FY results time.
Future gains
If earnings grow as forecast, even an 80p price target could mean a P/E of only 9.6 by 2026. And I reckon that could be a seriously cheap valuation.
That is, providing Lloyds gets past its short-term threats, interest rates get back to normal, and we see hints of economic growth. Not too much to ask for, then.
Will we see a Lloyds share price gain in 2025? I don’t share the 80p bullishness, not in the short term. But I’m cautiously optimistic about a modest improvement.
I really hope the price stays low though, so I can buy more shares with my dividend cash.
