Lloyds‘ (LSE:LLOY) share price rose an incredible 76% last year. Despite concerns over the FTSE 100 bank’s valuation, it’s got off to a solid start in 2026 too.
At 100.1p per share, it’s up almost 3% since 1 January. With the critical £1 level now taken out, could Lloyds enjoy more spectacular gains over the next year?
Let’s take a look.
Is Lloyds a Buy?
Lloyds shares have plenty of fans among retail and institutional investors, market commentators and analysts. Right now 18 brokers have ratings on the FTSE share, 12 of which rank it a Strong Buy or Buy.
Seven have allocated it a Hold rating, and one a Sell. On the whole, broker sentiment on the bank is clearly bullish.
Barclays analysts are especially bullish on Lloyds and its share price. Last week they raised their 12-month price target to 120p per share, up from 100p previously.
They predicted “sector-busting EPS growth of 70%” by 2028, which is twice the expected industry average and 20% above City consensus. Furthermore, analysts said that “we expect this improving outlook to come into sharper focus at this summer’s strategy update, alongside a potential move to half-yearly buybacks.”
Barclays added that it sees a “compelling valuation” at current prices, with Lloyds trading on a forward price-to-earnings (P/E) ratio of below 7 times for 2028. That’s below the broader European banking average of more than 9 times.
Too expensive?
But let’s pull back for a second. While the broader broker community’s positive on Lloyds shares, their average price forecast is way below that which Barclays is predicting, at 103.5p.
That suggests price growth of just 2% over the next year. In other words, they expect the bank’s momentum to hit a wall after 2025’s monster gains.
I’m personally not surprised. Unlike Barclays analysts, my view on Lloyds shares is that they’re massively overpriced at current levels. The bank’s price-to-book (P/B) ratio is an enormous 1.5 times, far above the 10-year average of 0.9.
I feel this is a better gauge of value than the bank’s P/E ratio three years from now. And especially as Lloyds faces a range of significant challenges that could derail earnings between now and then.
What might go wrong?
There are a number of reasons why I’ve avoided buying Lloyds for my own portfolio. Threats like rising credit impairments and weak loan growth are severe as the UK economy struggles. Revenues and net interest margins (NIMs) are also under threat as competition accelerates in Britain’s banking industry.
While Lloyds benefits from a structural hedge, margins are also in danger of toppling as the Bank of England trims its lending benchmark. And given Lloyds doesn’t generate as much income from fee-based services like wealth management than its FTSE 100 peers, it’s more exposed than its rivals to falling interest rates.
Bottom line
Considering these threats, I think the chances of Lloyds’ share price stagnating or even falling in 2026 are considerable. I won’t be buying the bank’s stock any time soon, though it may be worth consideration by investors with higher risk tolerance than I have.
