The Lloyds (LSE: LLOY) share price is making up for the misery it inflicted on investors during and after the financial crisis. It’s soared 160% over three years and 47% in the last 12 months, with dividends on top. Can its barnstorming performance continue?
Like all the big FTSE 100 banks, Lloyds has been boosted by higher interest rates. This allows it to expand its net interest margins, boosting revenues from new mortgages and other forms of lending.
Why has the FTSE 100 bank done so well?
Lloyds has also got lucky. It hedges against interest rate volatility, and older, low-yield agreements are continually rolling off, and being reinvested at a time of higher rates. In 2026, this is projected to generate £7bn worth of revenues. Sadly, it won’t last forever. At some point, interest rates are likely to fall.
The bank has other attractions. It’s now restored its reputation as a dividend machine. As a result of all that share price growth, the trailing yield has slipped to a modest 3.25%. Yet in the last three years, the board increased dividends by a generous 15% a pop. This suggests the income should keep rising. Lloyds is now forecast to yield 3.84% in 2026, rising to 4.53% in 2027.
Investors have been further rewarded by lucrative share buybacks, and feel comforted by its solid balance sheet, with today’s CET1 ratio of 13.4 giving it a “robust buffer against financial distress”, according to the bank.
Despite this terrific all-around performance, Lloyds still doesn’t look too expensive. Its forward price-to-earnings ratio is hardly demanding at 11.2 times.
Yet there are challenges. The struggling UK economy could limit growth prospects and potentially drive up bad debts, while our ailing housing market could hit demand for mortgages. Lloyds also has to pay the penalty for historic mis-selling of motor finance. It’s set aside £2bn.
I’ve done brilliantly since buying Lloyds in May 2023. Despite these challenges, I remain optimistic about its prospects. But what do the financial analysts say?
Where could the stock go next?
Some 21 analysts have delivered stock ratings in the past three months, and 13 call it a Strong Buy. There are just two sellers.
Further, 19 analysts have offered one-year price forecasts. The lowest, highest and median is in the table here:
| Stock price (p) | % change | |
| Share price today | 112p | – |
| Lowest target price | 92p | (17.8%) |
| Median target price | 122p | 8.9% |
| Highest target price | 135p | 20.5% |
If the most optimistic broker is correct, Lloyds shares could rise more than 20% over the next year, with dividends on top. We can dream. But let’s take that median figure of 8.9%. That would turn a £10,000 investment into £10,890. The 4.35% forecast yield would add another £435, lifting the total return to £11,325, which isn’t bad.
Investing is never guaranteed and Lloyds shares could just as easily fall instead. Athough with luck, the dividend should still come through. Ultimately, it’s for long-term that matters, and given the bank’s profitability, yield, buybacks and valuation, I think Lloyd shares remain well worth considering today.
