Lloyds (LSE:LLOY) shares are galloping to highs not seen for nearly a decade. The FTSE 100 banking group has delivered a share price gain of 31% in 2025 alone, boosted by a swathe of analyst upgrades.
After such stellar returns, does the stock still offer good value at 72p today? Or could some nasty hurdles facing the lender ultimately throw the Lloyds share price off track?
Let’s explore.
A stock with horsepower
Deutsche Bank, Morgan Stanley, and Peel Hunt have lifted their forecasts for the Lloyds share price in recent days. Although the City consensus 12-month price target of 75p suggests further growth could be limited, Morgan Stanley’s revised prediction of 90p would mean an additional 24% gain if it came to fruition.
It’s encouraging that confidence is returning for the black horse bank after some challenging years. Plus, it doesn’t look like the stock’s overbought just yet. Lloyds shares currently trade for a reasonable forward price-to-earnings (P/E) ratio below 10.4.
Granted, this is above the stock’s five-year average. It’s also higher than the P/E multiples of major FTSE 100 competitors, such as Barclays (7.2), NatWest Group (7.9), and HSBC (8.9). However, the ratio’s still low enough to indicate Lloyds shares offer some value today.
Arguably, the price-to-book (P/B) ratio is a more useful metric when valuing banking stocks. On this yardstick, Lloyds fares reasonably well. At a 0.96 multiple, it’s just under a P/B value of one, which can be a handy indicator that a stock’s fairly priced.
The bank’s fourth-quarter results contained notable highlights, especially for income investors. These included a generous £1.7bn share buyback and a 15% dividend hike. The stock’s current 4.4% dividend yield comfortably beats the FTSE 100 average of 3.5%.
Overall, there are good reasons for optimism.
Rocky ride ahead?
That said, there are flies in the ointment for the Lloyds share price. A historic motor finance mis-selling scandal is a dark cloud that still hangs over the bank. The Supreme Court will rule on the issue this month.
Lloyds has boosted its compensation reserves by £700m to £1.2bn, but investors with long memories will recall the mayhem resulting from PPI claims. The lender paid out a whopping £21.9bn to make amends for those mistakes.
Another key risk is the weakness of the British economy. The Office for Budget Responsibility (OBR) recently slashed its UK GDP growth forecast for 2025 from 2% to 1%. Trump’s expansive global tariffs, due to be announced today (2 April), compound the uncertain outlook.
As the country’s biggest mortgage lender, the fate of Lloyds shares is intrinsically linked to UK economic performance and the domestic housing market. Macro risks could end up torpedoing some of the more hopeful predictions for the bank’s share price growth.
My take
As a Lloyds shareholder, I’m delighted by the bank’s recent stock market performance. The recent dividend rise was also a sweet reward since regular income payouts are one of my core reasons for holding the stock.
However, Lloyds shares aren’t quite the bargain they once were, especially compared to the bank’s rivals. I’m also wary there are significant macroeconomic challenges facing the group. I won’t be selling, but I’m not inclined to add to my position today either.
