Lloyds Banking Group (LSE: LLOY) shares have climbed 40% so far in 2025. And that’s with the huge uncertainty of the car loan mis-selling scandal hanging over the outlook.
In the circumstances, I might have expected a threat like that to hold the share price back. Hmm, maybe it is, and maybe Lloyds shareholders would be further in profit now without it?
Price forecasts
According to Investors Chronicle, five out of 11 analysts have now dropped their Buy stances from a year ago. And the majority now sit on a Hold recommendation. There’s a median price target of 75p — a penny less than where Lloyds shares stand at the time of writing.
Over at MarketScreener we see an average target a little higher at 80p, but that’s not far ahead of today. It really does look like the City thinks we should hold back and keep our powder dry.
We’re looking at only modest earnings growth forecasts for the 2025 year, too. And that again suggests a lack of enthusiasm among the big investors.
Fundamentals
Forecasts put earnings per share (EPS) at 6.5p this year, barely ahead of the 6.2p reported for the 2024 full year. On the basis of that, together with those analysts’ takes, where might I expect the Lloyds share price to be in a year’s time? Well, going on those things alone, probably not much higher than where it is now.
But that would be missing one vital consideration. A year from now, investors won’t be judging things based on what will then be old news. No, they’ll take forecasts for the 2026 year into account when they think about where the price might be going next.
If nothing changes, we could be facing a forecast 9.1p EPS figure for 2026, rising even higher to about 11p by 2027. On today’s share price, that would put the Lloyds forward price-to-earnings (P/E) ratios at just 8.4 and 6.9 for the two years. respectively.
Fair share price
The longer-term future could hinge on how Lloyds manages to cope with falling interest rates, which can hurt lending profits. But the bank’s 2024 net interest margin, at 2.95%, wasn’t far behind the 3.11% a year prior. And by Q1 time this year, it actually rose, reaching 3.03%.
As interest rates fall further, the balance between tighter margins and potentially higher lending volumes could be key. There’s clearly a risk there. But I’m happy enough with what I see so far.
To get the Lloyds forward P/E a year from now to the same level it is today implies a 39% share price rise. And that could turn £10,000 into £13,900. And it’s in line with the highest price target quoted by Investors Chronicle of 100p.
Over the hurdles
All this speculation keeps me bullish on Lloyds shares for the long term. But we have to get past that car loan thing first. I won’t buy any more just yet, but I’m definitely considering it for later.
