Lloyds‘ (LSE: LLOY) shares have been a good investment. Over the last year, the bank’s share price has risen from 78p to 112p, turning a £5,000 investment into more than £7,000.
But where are the shares expected to go from here? Let’s take a look at analysts’ forecasts for 2027.
Further gains expected
While the shares have risen significantly over the last year, analysts see the potential for more gains in the medium term. At present, the average analyst 12-month price target is 122p — about 9% higher than the current share price.
If the shares were to hit that price, a £5,000 investment today could be worth a little over £5,400 by mid-2027. Add in dividends and investors could be looking at total capital of around £5,600.
It’s worth noting that some of the more recent 12-month price targets are significantly higher than 122p. For example, Morgan Stanley recently came out with a price target of 135p. Other brokers with bullish targets include Barclays and Citi. They have Lloyds’ shares going to 130p and 125p respectively.
The bull case for Lloyds
Are the shares worth considering given this bullish analyst sentiment? Potentially. There’s definitely things to like about Lloyds from an investment perspective today. For a start, there’s the fact that the bank is performing well.
For Q1, underlying profit was £2bn, up from £1.5bn a year earlier. Earnings per share came in at 2.4p versus 1.7p in Q1 2025.
Second, the bank’s making moves to diversify its income streams. For example, it’s executing a multi-year push into wealth management, pensions, and mass-affluent advisory services.
Note that wealth management can be very lucrative for banks. Because fees are generally tied to assets under management and these tend to rise over time.
Another attraction is the valuation. Currently, the price-to-earnings (P/E) ratio here is only 11.
Additionally, we have a near-4% dividend yield and share buybacks. Currently, the bank’s executing a £1.75bn buyback – this should support earnings per share.
The bear case
Having said all that, Lloyds has its flaws. One thing that concerns me is that today, most of its income still comes from UK lending. This is a risk. If UK economic growth slows and/or unemployment rises, Lloyds could face some challenges.
Another risk is rising competition. Recently, Revolut was awarded a full UK banking license.
This means that it can now compete with Lloyds in areas such as lending and deposits. I don’t think this risk should be taken lightly, as Revolut has a strong brand and a rapidly growing user base.
Better bank stocks to consider?
Given these risks, I see a little more appeal in some other bank stocks. If someone was putting money into the bank sector today, I think they should be focusing on institutions that have exposure to investment banking, trading, and wealth management, as well as lending.
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Edward Sheldon does not hold any positions in the companies mentioned
