The past few years have been kind to shareholders of Lloyds Banking Group (LSE: LLOY). Over five years, the Lloyds share price has thrashed the wider FTSE 100 index, with this stock trading at levels not seen in 17 years. After such a strong run, will Lloyds shares finally break the £1 mark next year?
Lloyds shares surge
As I write, the Lloyds share price stands at 93.72p, valuing the Black Horse bank at £55.2bn. This stock has been a big winner in 2025, surging by 71.1%. This thrashes the FTSE 100’s gain of 18.1% since 31 December 2024.
Furthermore, this UK share has leapt by 69.2% over 12 months and has soared by 168.5% over five years. These are remarkable returns for what many investors might view as a ‘boring, old-economy’ stock.
Of course, Lloyds and many other shares took a brutal beating during the global financial crisis of 2007/09. As an ex-employee of this industry, I feared the worse, so I sold all my financial stocks before a tsunami smashed stock markets in 2008. Indeed, I recall selling some of my Lloyds shares at prices nearing £3 in 2007.
I’m glad I did, because Lloyds stock crashed spectacularly, hitting a closing low of 21.67p on 9 March 2009. Those brave enough to have bought into the bank back then made out like bandits over the following 16-plus years.
For the record, my family portfolio bought Lloyds shares in mid-2022, paying 43.5p a share. To date, we have made a paper gain of 115.7%, but by reinvesting all our dividends into buying more shares, we have boosted our return even higher.
Don’t forget dividends
The above gains all exclude dividends, the cash payments made by some companies to their owners. Traditionally, Lloyds and many other FTSE 100 shares have been strong providers of UK dividends to shareholders.
With Lloyds shares rising so strongly in recent years, its dividend yield has declined. Currently, it’s about 3.6% a year — still above the Footsie’s yearly cash yield of below 3.2%.
Will we see £1 in 2026?
At its 52-week high, the Lloyds share price briefly hit 97.74p on 2 December, just a couple of weeks ago. Back then, I got excited at the prospects of the stock clearing £1, but it has since retreated 4.1%.
Nevertheless, I’m fairly sure that the shares will eventually exceed 100p next year, the only question for me being when. But I suspect there will be some volatility on the way, as often happens when shares rise strongly and steeply.
Of course, I could be wrong and the entire stock market could sink in 2026, driven lower by some global factor or another. Also, as the UK’s #1 mortgage lender, Lloyds is heavily exposed to the health of the British housing market. If house prices fall, interest rates don’t come down, or mortgage arrears rise, then it could spell bad news for this and other banking stocks.
Likewise, lower business lending or rising bad debts and loan losses could hit Lloyds’ profits and cash flow in 2026. But we have no intention at selling at current prices, even though there may be more exciting stocks out there…
