Lloyds Banking Group (LSE: LLOY) shares have had an up-and-down year so far in 2026. They peaked at over 114p in early February, then fell back below 88p near the end of March. And at the time of writing, Lloyds is hovering around 110p.
But the stock’s five-year record with a rise of over 130% has been spectacular, and a number of commentators — including me — think we could now be in for a good spell of steady earnings growth.
A transition point
It was legendary investor Ben Graham who pointed out that emotion can drive short-term stock prices, but that rationality wins through in the long term — and I see exactly that happening at Lloyds. It had been seriously undervalued as a victim of negative sentiment, but investors are now looking at real long-term potential.
Factors that could sway Lloyds’ shares by 2027 include…
- Actual results from Lloyds between now and then.
- Broker forecasts out as far as they go.
- What a fair valuation for a domestic bank should be.
- Interest rates, driven by the UK economy.
- Political events, with a new Prime Minister on the scene.
We can get a bit of a handle on some of those, assisted by the large number of analysts offering their opinions on Lloyds.
The next few years
What about the economy? My take is that we really can see the outlook finally lifting. The problem is, I’ve felt that way before — but I really am more optimistic this time.
Some shareholders worry about falling interest rates. But I expect the effect is largely neutral overall, with higher mortgage demand offsetting a tightening of Lloyds’ net interest margin. Other than that, the economy’s largely guesswork — even for economists.
So lets turn to probably the best set of data we have at hand — the next few years of analyst forecasts. Here’s how the experts see things lining up for Lloyds…
| Year | Earnings per share | % change | P/E |
| 2025 (historic) | 6.9p | +11.3% | 15.9 |
| 2026 (forecast) | 10.0p | +44.9% | 11.0 |
| 2027 (forecast) | 11.8p | +18.0% | 9.3 |
| 2028 (forecast) | 13.6p | +15.2% | 8.1 |
So what’s the verdict?
My take on a 2027 price for Lloyds’ shares hinges on where I think a fair price-to-earnings (P/E) bank valuation might lie. Traditionally, bank shares have lagged the FTSE 100 average. That’s partly because the sector is cyclical and highly regulated. And the Footsie average is also pulled up by higher-valued growth stocks.
Typically, we’ll see a 30%-50% discount compared to the index, largely reflecting market sentiment. I reckon sentiment is improving — and for 2027 I think a P/E of 10 could be about right. That would put Lloyds’ shares at 118p, only 7.2% ahead of the time of writing. But it could also mean a 136p share price by 2028, up 23.6% from today.
Earnings and dividend growth could push the valuation higher, though economic uncertainty could hold it back.
For me Lloyds is a Hold, and I’ll see how first-half results due in July shape up before I think about buying more. Investors considering a purchase might benefit from the same approach.
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Alan Oscroft owns shares in Lloyds Banking Group.
