Lloyds‘ (LSE: LLOY) shares have basically gone nowhere this year, despite a sharp spike above 112p in early February. The price is still hovering just around 99p, which is pretty much where it was when the year began.
Barclays and NatWest are worse off, slipping 5%-10% from their February highs, so it’s not just Lloyds feeling the strain. But HSBC looks different: it’s up almost 17% and trading near a 52‑week high.
The big difference is that Lloyds, Barclays and NatWest are heavily tied to the UK economy, rates, and the housing market. Meanwhile, HSBC leans much more on Asia and global wealth flows.
Lloyds has warned about a ‘stagflationary’ backdrop, with UK GDP growth now projected at just 0.5% in 2026. By year end, unemployment could rise towards 5.6% and CPI inflation could reach 3.9%.
In that context, a flat share price is annoying, but it isn’t exactly a shock, is it?
Why I’m not worried… yet
For income, Lloyds is still doing a decent job. At current price levels, the stock yields roughly 3.6%, based on a trailing dividend of 3.65p per share.
Its board describes that payout as “progressive and sustainable”, and the 2025 total dividend was 15% higher than the year before.
Over the past decade, dividend per share has grown at an annualised rate of about 4.96%, which isn’t spectacular but is steady in bank‑land.
As Charlie Nunn put it after recent results:
“We are making good progress on our strategy and remain on track to deliver higher, more sustainable returns.”
That’s exactly what a long‑term income holder wants to hear.
Is it better value than competitors?
On value, Lloyds trades on a forward price-to-earnings (P/E) ratio 10–11, slightly below the FTSE All‑Share’s 12.7 times.
| Bank | Dividend yield | P/E ratio (forward) |
|---|---|---|
| Lloyds | 3.58% | 9.76 |
| Barclays | 1.88% | 8.67 |
| NatWest | 5.43% | 8.12 |
| HSBC | 4.02% | 11.07 |
Reliable estimates suggest the shares are trading at 49% below fair value using a discounted cash flow model. Analysts on average offer a 12-month price target of 120p, so sentiment remains fairly high.
Financial resilience
On first glance, Lloyds’ balance sheet seems highly leveraged, with liabilities far outweighing equity. But that isn’t unusual for a large bank.
What matters more is capital and liquidity. Lloyds finished 2024 with a CET1 ratio of 14.2% and a group liquidity coverage ratio of 136%, both comfortably above regulatory minimums. That gives it room to keep paying and growing dividends even if the economy wobbles.
But with interest rates still at 3.75%, and cuts expected to be pushed back to 2027, there’s a higher risk of defaults for households and small businesses.
Plus, the motor finance scandal is still not fully resolved. Lloyds has already set aside roughly £1.2 billion, but has warned that “an additional provision is likely to be required which may be material” once the final scheme is agreed.
The bottom line
All things considered, I can see why the market is cautious on Lloyds. Still, a reliable and growing 3.6% yield in a reasonably well‑capitalised bank trading below fair‑value seems like a good deal to investigate further.
As such, the stagnant price hasn’t scared me off – yet. My shares may not deliver huge returns this year, but I’ll keep holding them for the indefinite future.
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Mark Hartley owns shares in Lloyds and HSBC.
