In 2025, Lloyds Banking Group (LSE:LLOY) raised the annual dividend paid on its shares by a massive 15.2%. This inflation-busting hike was possible due to a 6.9% year-on-year increase in revenue and a 11.1% rise in earnings per share (EPS).
But how many of the bank’s shares would be needed to beat the highest rate of interest paid on one of its savings accounts? Let’s find out.
Monthly saver
Currently (2 April), it’s possible to earn interest of 6.25% on the bank’s ‘Club Lloyds Monthly Saver’ product. This is likely to be extremely attractive to those with a bit of spare cash. After all, the Bank of England’s base rate is 3.75%.
However, unlike someone wanting to buy the bank’s shares, there’s a monthly £400 limit on how much can be put into the account. Also, the rate quoted is only available for 12 months. After a year, the account reverts back to a ‘Standard Saver’ and pays 1% a year.
And at the risk of being accused of being a bit of a killjoy, it has to be remembered that for many people the interest earned will be taxed. In contrast, dividend income in a Stocks and Shares ISA remains tax free.
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However, leaving these details to one side, the 6.25% rate is higher than the stock’s current yield of 3.8%.
Based on the bank’s 2025 dividend, it would need 34,123 Lloyds shares costing £32,895 to match the £1,250 of interest earned on a £20,000 deposit.
An alternative approach
However, history shows that the stock market has outperformed cash. Indeed, Lloyds’ share price has increased by an average of 16.2% a year since April 2021. This excludes the impact of the dividends received over this period. Of course, there can never be any certainty when it comes to payouts.
Admittedly, a 16.2% annual return is exceptional. Over the same period, the FTSE 350‘s increased by 6.4% a year.
Even so, high-interest savings accounts are often time limited. In contrast, there’s no restriction (other than an individual’s personal circumstances) on the amount that can be invested in the stock market. And by taking a long-term approach, it’s possible to build impressive wealth.
By way of example, the table below shows how much £400 a month will grow over 25 years depending on the rate of return achieved.
| Annual rate of return | Contribution (£) | Investment growth (£) | Total value (£) |
|---|---|---|---|
| 5% | 120,000 | 115,248 | 235,248 |
| 6% | 120,000 | 151,832 | 271,832 |
| 7% | 120,000 | 194,987 | 314,987 |
| 8% | 120,000 | 245,935 | 365,935 |
A good run
With its strong track record of generous dividends, I can see why Lloyds has more shareholders than any other UK company.
And since the pandemic, it has performed strongly. In 2025, it beat analysts’ earnings expectations. It also improved its net interest margin and return on tangible equity.
This has played a major part in driving the bank’s share price higher. Since the start of 2025, it’s risen nearly 80%.
My view
However, in my opinion, Lloyds’ shares no longer look so attractive after their amazing 2025 rally.
Relative to earnings, they are the most expensive of the FTSE 100’s five banks.
And while I acknowledge that analysts are forecasting impressive growth through until 2028, they appear a little too optimistic to me given the bank’s near-total reliance on a subdued British economy that could be badly affected by another round of inflation.
Fortunately, there are lots of other brilliant high-yielding stocks to consider at the moment, ones whose share prices appear to me to offer better value than Lloyds.
