It’s fair to say that Lloyds’ (LSE: LLOY) share price has defied most investors’ expectations this year. In recent weeks, it’s risen as high as 96p – roughly 75% higher than the price it started the year at.
That’s a huge gain for a large-cap stock in the space of less than a year. And it begs the question – is now the time to consider banking some profits here?
Solid business performance
Business conditions for Lloyds have been supportive recently. In the UK, interest rates have remained relatively high allowing banks to earn a healthy spread between lending and borrowing rates.
Meanwhile, while the UK economy has been sluggish, it hasn’t tanked. So Lloyds hasn’t seen a sharp rise in loan defaults.
In terms of actual numbers, Lloyds generated underlying net interest income of £6.7bn for the first half of 2025. This was up 5% year on year. Earnings per share for H1 was 3.8p. This was 12% higher than in H1 2024.
Now, of course, we need to look forward and not back. And this is where things get a little more opaque. Looking ahead, there’s a good chance that UK interest rates will come down materially over the next year (research firm Interpretiv expects one more rate cut this year and potentially a couple of cuts next year). This could squeeze Lloyds’ profits.
We could also see more weakness in the economy, particularly if the UK Budget introduces significant tax increases. This could lead to more loan defaults.
Is there any value left?
Turning to the valuation, analysts expect Lloyds to generate earnings per share of 7.31p this year. That puts the stock on a price-to-earnings (P/E) ratio of about 12. That’s pretty high for Lloyds. I don’t see a lot of value in the bank at that multiple.
That said, next year earnings per share are projected to be 9.6p. That brings the P/E ratio down below 10, which is more attractive. It’s worth noting that the average analyst price target is 97p. So analysts see potential for some gains, but not a lot.
As for the dividend yield, it remains healthy. However, it’s recently fallen below the 4% mark on the back of the share price strength. So the stock’s no longer the income machine it was a year or two ago.
Share price obstacles
While Lloyds’ share price is in a strong uptrend right now it’s worth pointing out that large/important numbers can often act as ‘resistance’ levels for stocks (ie a stock can struggle to get above a certain share price). It’s a psychological thing – a lot of people tend to cash out just below a big number.
Personally, I wouldn’t be surprised if £1 was a major resistance level for Lloyds shares in the near term. After all, the stock hasn’t traded this high since 2008 so there could be a few sellers around this level.
My view
Putting this all together, my view on Lloyds is rather Neutral right now. I don’t see a ton of value left in the stock but it’s also not screaming Sell to me.
One thing I will say though is that I believe there are better investment opportunities than Lloyds in the market today. And it seems that many of my colleagues agree.
