Lloyds (LSE: LLOY) shares recently touched a 52-week high of 79.19p, a welcome sight after years of volatility and pandemic-era underperformance. The last time the shares traded that high was late 2015.
Naturally, this is a promising sign for long-suffering shareholders like me. But for new investors, the question is whether the recent rally leaves any value on the table – or if the opportunity has already passed.
What’s driving the surge?
The share price has climbed over 40% year to date, supported by a modest improvement in investor sentiment towards UK banks. A sector-wide upgrade by analysts has also helped. Rising interest rates have expanded net interest margins, even as economic data suggest the Bank of England may begin easing rates in the second half of 2025.
In this environment, Lloyds — with its domestic focus and large retail deposit base — could emerge as a key beneficiary.
But the bank’s latest Q1 results weren’t flawless. Underlying profits fell 7% to £1.52bn, with the bank putting aside £105m to prepare for a potential rise in bad loans. The decline was partly due to higher operating costs and regulatory charges. These challenges, combined with ongoing economic uncertainty, could weigh on performance in the second half of the year.
A reliable dividend stock
Despite the mixed earnings, Lloyds continues to return cash to shareholders in the form of dividends. The 2024 final dividend of 2.11p per share was paid in May, bringing the full-year yield to around 4.7% at current prices. The group also announced a £2bn share buyback earlier this year.
For income-focused investors, that’s attractive. While not the highest yield on the FTSE 100, it’s backed by a well-capitalised balance sheet and a CET1 ratio of 13.7%. Provided the UK avoids a severe downturn, the dividend looks sustainable.
Digital shift and branch closures
Like many high street banks, Lloyds is grappling with the shift to digital, recently announcing plans to close 136 branches across the UK by March 2026. The bank has committed to no job losses, but the move underscores a broader transformation — and the costs associated with it.
At the same time, Lloyds is investing in technology and digital services, aiming to improve efficiency and customer experience. While the upfront expense is significant, these efforts could position the bank more competitively over the long term.
Still cheap?
Even after the recent rally, Lloyds shares still trade below their pre-pandemic levels. The stock’s valued at around 7.5 times forward earnings — an attractive valuation by historical or sector standards. That offers a margin of safety for value-oriented investors.
However, growth may be modest. As a largely UK-focused bank, it lacks the international diversification of some rivals. Any setback in the UK housing market or rise in unemployment could quickly impact performance.
Lloyds shares may no longer be the deep value play they were last year, but they still look reasonably priced for long-term investors seeking income and gradual capital growth.
While not without risks, the bank’s stable dividend, improving sentiment and leaner cost base make it worth considering for a diversified passive income portfolio — even near a 52-week high.
