Vodafone (LSE:VOD) and Lloyds‘ (LSE:LLOY) shares are two of the most widely-held stocks in the UK. And right now, they’re generating some serious excitement.
Lloyds is up 29.7% over the last 12 months, while Vodafone has done even better, climbing 48.8% over the same period. And anyone who’s already put £1,000 to work last June could now be sitting on anywhere between £1,297 and £1,488.
So with both stocks now trading close to or above the £1 mark, the race to £2 is well and truly on. But which one gets there first?
Can Lloyds keep climbing?
Let’s start with the British banking giant. In the first quarter this year, Lloyds’ net income grew 9% to £4.8bn while delivering a chunky return on tangible equity of 17%. That’s well ahead of management’s own guidance. And in the words of CEO Charlie Nunn, the bank is showing a “sustained strength in financial performance.”
That said, there are some genuine points of concern for investors to consider. It’s no secret that Lloyds’ performance is highly sensitive to the UK economy. And with inflation, particularly for energy prices, expected to hit households and businesses later this summer, the risk of higher default rates on loans is starting to rise.
After all, beyond being squeezed by higher prices, the Bank of England may be forced to respond with higher interest rates. That sounds good on paper since it helps expand Lloyds’ profit margins. But it also simultaneously reduces demand for new borrowing, especially mortgages.
Does Vodafone have the edge?
Looking across the table to Vodafone, the telecoms firm’s turnaround progress is starting to feel real. In its latest full-year results, group organic service revenue grew 5.4%, underlying earnings rose 4.5%, and the business returned a whopping €3.1bn to shareholders in its 2026 fiscal year (ending in March).
Perhaps most importantly, Germany – its biggest and most troubled market – has finally returned to growth after years of decline. As CEO Margherita Della Valle put it: “Vodafone has built broad-based momentum.” The Three UK integration is also running ahead of schedule, which should unlock material cost synergies and help drive UK free cash flow higher.
The bear case however, centres on one number: €52.6bn in debts & equivalents.
Even with free cash flow improving and non-core asset disposals, deleveraging a balance sheet that size will take years. And with the Three UK integration still in its early stages, any execution stumble could delay the very cash generation needed to bring that number down.
So which reaches £2 first?
In my opinion, out of the two, Vodafone looks the more interesting race to watch. Its geographic diversification, accelerating revenue growth, and structural improvements give it more levers to pull. If the debt burden continues to shrink and Germany sustains its recovery, the path to £2 looks more credible from here over the coming years.
To be fair, Lloyds is a high-quality bank delivering impressive numbers. But its near-total dependence on the UK economy makes it more vulnerable to the inflationary pressures building right now.
That’s why I’m paying more attention to Vodafone shares and think investors should consider digging a little deeper.
Should you invest £5,000 in Lloyds Banking Group Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
