Since the turn of 2025, Lloyds (LSE: LLOY) has been on a tear. We are not quite yet at the half point of the year but already, the Lloyds share price is up by 40%.
Could there be more price gains still to come – and might now be the right moment for me to add some Lloyds shares to my ISA?
Banks have been doing better than feared
Lloyds has seen its share price soar this year – but it is not the only bank in that position.
Natwest is up 27% so far this year, Barclays has moved up 27%, and HSBC by 12%.
I think a lot of that is down to a growing sense of relief in the market since the start of the year. There has been considerable economic uncertainty, but broadly speaking, the global economy seems to be holding up better than expected.
That and the prospect of potential interest rate cuts has made the risk of loan defaults seem lower than was perhaps the case at the start of 2025.
Still, Lloyds has outperformed its peers so far this year when it comes to share price growth. To some extent, though, this is just catching up. Over one year, Lloyds is up 37%, but Natwest has soared 63%, while Barclays is up 61% and HSBC 28%.
HSBC’s weaker relative performance could reflect investor concerns about its large exposure to Asian markets amid ongoing trade disputes. Not that I would be unhappy as an investor with a 28% one-year gain if I owned a share!
Why, though, has Lloyds fared worse than key UK rivals over the past year, though better lately? One explanation could be that the City has been worried about its exposure to car finance mis-selling claims.
In the final quarter of last year, the company set aside another £700m to settle potential costs associated with that. It remains unclear about what the long-term costs might end up meaning for profits.
I’m not tempted to buy
Even despite that, the share has performed well. The Lloyds share price is now 147% higher than five years ago.
The business has a lot to like about it. It is the UK’s leading mortgage lender, with strong brands and a large customer base. It is massively profitable, reporting £1.1bn of profit after tax in the first quarter alone.
However, that was 7% lower than in the same quarter last year. A number of risks concern me and the potential for more car finance mis-selling provisions is only one of them. I am still not clear that the global economy is out of the woods – or anything like it.
The UK economy is core to Lloyds’ performance and my main concern is that if it weakens, loan default rates could rise and hurt profits badly at the bank.
If that does not happen, the share price could move up even from here. The current price-to-earnings ratio of 12 does not look excessive to me.
But the uncertain economic outlook is a risk that puts me off buying any bank shares for now, including Lloyds.
