The Lloyds (LSE:LLOY) share price has been on a rampage this year. With profits flying on the back of higher interest rates, the FTSE bank stock has seen its market cap surge by almost 75% since January. But with the stock now close to the long-anticipated 100p threshold, does it have enough momentum to continue climbing in 2026?
Here’s what the experts are saying.
Is Lloyds still a buy?
Even with earnings expanding drastically throughout 2025, more profits could be on the horizon. Continued investments into AI alongside cost restructuring efforts are delivering robust savings for the business. Subsequently, Lloyds’ underlying return on tangible equity (RoTE) recently hit an impressive high of 14.6% (excluding motor financial scandal provisions) in its latest third-quarter results.
But it’s not just its core banking operations excelling at the moment. Its insurance, pensions, and investments segments have also been delivering solid results, offering some welcome diversification to the group’s revenue stream.
Looking ahead to 2026, there’s still a lot to be excited about. Beyond the continued benefits from cost-saving efforts, the fall in interest rates is expected to heat the UK mortgage market back up. That not only means greater demand for new loans, but also a potential wave of refinancing demand as homeowners seek to benefit from the lower rates.
As such, some bullish analysts have projected that Lloyds’ all-important RoTE could reach beyond 15% next year. And apart from positioning the business to be among the most efficient banks in Britain, that also opens the door to potential further ramp-ups of share buyback programmes and dividends.
With that in mind, it’s not a major surprise that 12 out of 18 institutional investors have the bank stock rated as a Buy or Outperform.
What to watch
Despite the compelling narrative and trajectory surrounding this business, there are some notable investment risks to consider.
As one of the most widely covered and popular stocks in Britain, this looming growth potential has likely already been baked into its share price. And looking at the average consensus share price forecast, it seems that Lloyds shares are already trading close to their estimated intrinsic value of 99.5p.
Consequently, the Lloyds share price might not deliver much growth next year, even if Lloyds meets current expectations. However, should the business slip up, then the recent rally could come to an end.
Perhaps the most dominant risk surrounding Lloyds right now is interest rates. And that’s because rate cuts are a bit of a double-edged sword.
As previously discussed, lower rates improve home affordability, driving up demand for mortgages. But they also put pressure on Lloyds’ net interest margin.
As such, the positive impact of higher lending volumes needs to be offset by the negative impact of tighter margins. Yet with unemployment and the risk of a recession on the rise, volumes could easily disappoint.
The bottom line
Where does this leave investors? Personally, while I admire the strength and improvement of Lloyds’ business, as an investment, I’m currently not tempted. The bank could still fit nicely into a defensive portfolio given its 3.5% dividend yield. But as a growth investor, I think there are far more compelling opportunities to explore elsewhere.
