Over the last 12 months, the Lloyds (LSE:LLOY) share price has enjoyed a pretty remarkable rally. After years of hovering between 40p and 50p, the bank stock finally broke free and climbed by over 20% since last April (40% if we ignore the recent tariff-induced sell-off).
With economic conditions in the UK steadily improving and interest rates falling, the housing market is starting to heat back up. That’s given Lloyds a welcome boost to its mortgage business, along with a general rise in borrowing demand from businesses, all translating into a larger loan book.
Considering these trends are expected to continue throughout 2025, is the Lloyds share price on track to climb even higher? Or should investors consider using the recent rally as an exit? Here’s what the latest analyst forecasts say.
Lloyds is at a crossroads
Given that Lloyds is one of the biggest banks listed on the London Stock Exchange, it should come as no surprise that it also has a large following from institutional investors. In fact, there are currently 20 analysts tracking this business, more than half of which have the stock rated as Hold.
A similar distribution of opinions exists when looking at the 12-month price targets. Right now, the average consensus among analysts is that the Lloyds share price will reach 75p by this time next year. That’s roughly where the stock trades today, suggesting that its growth potential from higher borrowing activity may already be baked into the share price.
However, one analyst believes the bank could reach as high as 90p, signalling a 25% potential gain. But at the same time, another is forecasting an 18% decline to 60p. These different possibilities appear to be linked to the ongoing debate surrounding the motor financing scandal and undisclosed commissions to car loan brokers.
The legal battle
Last week, Lloyds, along with other British banks, went to the Supreme Court to plead their case. However, investors are likely going to have to wait several more weeks before the court issues its opinion. If Lloyds wins, the £1.15bn of cash it’s put aside to settle complaints would be freed for reinvestment, buybacks, or dividends. However, should the court rule against the banks, the £1.15bn may not be enough.
In the long term, Lloyds looks more than capable of bouncing back and thriving should the worst come to pass. After all, this isn’t the first time it’s found itself at the centre of such a fiasco. Even the chief executive of the Financial Conduct Authority has said that car finance mis-selling is unlikely to be on the same scale as the PPI scandal of the 2010s.
Nevertheless, an unfavourable outcome will likely cause short-term disruption. And that could translate into the Lloyds share price taking a tumble, especially given the rally it’s enjoyed in recent months.
The bottom line
I’m not a Lloyds shareholder, and given the uncertainty, I’m not rushing to become one right now. There’s no denying that the stock still looks reasonably cheap at a forward price-to-earnings ratio of 10, even after the recent rally. But with its near-term future largely out of management’s control, I think it’s best to consider staying on the side of caution and wait for some much-needed clarity.
