Lloyds Banking Group (LSE: LLOY) shares have slipped almost 19% from recent highs of around 115p, and now sit near 93p. The lower price got me thinking: this could be an excellent opportunity for an investor opening a fresh Stocks and Shares ISA this tax season.
Out of the UK’s ‘big four’ banks, Lloyds is the most popular choice among ISA investors due to its low price, high yield and brand familiarty. That makes it an excellent starter stock to consider.
But popular or not, the question remains: is this really a chance to buy cheap, or could the price dip further?
What analysts think
Lloyds’ shares do look a bit cheaper right now, but that doesn’t mean they’ll bounce back immediately. The mood in the City is cautiously optimistic rather than wildly bullish.
On average, analysts give it either a Hold or Moderate Buy rating, with average 12‑month targets in the 105p-110p range – a bit above today’s price.
Some top brokers are more positive. Both Deutsche Bank and Barclays expect the price to reach between 120p and 125p over the next year.
The dividend yield remains solid, and most forecasts point to earnings growing gently rather than shrinking, which helps support that more positive view.
Looking closer
Under the bonnet, the latest full‑year numbers were a bit mixed. Lloyds remained profitable, of course, but earnings were down around 5% versus 2024. This was largely due to extra costs linked to the ongoing motor finance scandal.
Even so, the bank still managed a statutory return on tangible equity (RoTE) of roughly 13% in 2025. Plus, management upgraded its 2026 target to above 16%, confident it’s among the better‑performing big banks in Europe.
And it hasn’t just been riding the coattails of high interest rates. The bank’s been investing heavily in new products and digital services, which have already brought in about £1.4bn of extra revenue (targeting £2bn by year-end).
That sort of recurring, fee‑style income helps smooth things out if margins on loans get squeezed as interest rates fall.
Capital strength’s another plus. As it continues to generate more capital than required each year, dividends and share buybacks remain well-supported. Which brings us to the next point…
A dividend powerhouse
Income remains the key part of Lloyds’ appeal, in my opinion. On some broker forecasts, the dividend could reach about 4.3p per share in 2026. That could mean a yield above 6% at today’s price if those predictions materialise. For a patient investor, that kind of cash return – plus any price recovery – can make a real difference to long‑term results.
Of course, there are risks, most notably, higher‑than‑expected costs from the motor finance review. On top of that, if the UK economy weakens further, or interest rates fall faster than expected, both could hurt profits in the short-term.
Nothing to fear
For long‑term investors hunting reliable income, Lloyds remains a cornerstone stock to consider for any investment style. The recent drop, while scary, doesn’t feel long-term. It’s more like a delayed correction after such a long rally the past few years – especially given the confidence of both management and analysts.
Overall, I still expect modest growth and rising dividends in the coming years. But for those uncomfortable with UK banking sector risk, I’ve recently covered several other reliable income stocks in the retail and utility sectors.
