The Lloyds (LSE:LLOY) share price has absolutely crushed the FTSE 100 in recent times. According to AJ Bell, the five-year annualised total return is just shy of 23%.
Put another way, £10k invested in the Black Horse bank in mid-2021 would now be worth almost £28k, assuming dividends were reinvested. This comes after double-digit gains in four out of the past five years, including a scorching 85% total return in 2025.
The stock is off to a flyer in 2026 too, gaining 16.7%. Meanwhile, the average price target from 19 analysts suggests the share price could edge up to almost 124p over the next 12 months.
But with risks mounting in the global economy, and the new government’s upcoming autumn Budget causing yet more uncertainty for UK businesses, might 2026 end up as a rare down year for Lloyds?
Could it even, gulp, crash? I asked ChatGPT, the world’s most popular AI chatbot, to put a probability figure on this.
What did the bot say?
The AI app says that a crash, which it defines as a fall of 30% or more over a short period, would probably require one or more of these things to happen:
- A deep UK recession and job losses leading to a surge in bad loans.
- A housing market slump (Lloyds being the UK’s largest mortgage lender).
- A major shock, similar to the motor finance investigation.
- A broader stock market sell-off that drags down all bank shares.
The bot doesn’t see a crash as the most likely outcome, but it did give a 15% probability of a crash, and a further 35% chance of a correction (10%–30% decline). That’s a 50% chance that Lloyds stock could drop by double digits from today’s price.
Is ChatGPT too bearish?
Despite the real risks mentioned above, such a high figure might surprise investors.
After all, in late April, Lloyds reported a strong start to 2026, reaffirming full-year guidance for underlying net interest income of at least £14.9bn and a return on tangible equity above 16%.
Our differentiated business model remains resilient in the context of the current economic uncertainties.
CEO Charlie Nunn, April 2026.
My view is that ChatGPT’s probability figure is a little high. Particularly because a correction is more often defined as a drop of 10%–20% from a recent high (not 10%–30%, as the bot said).
We’re nearly into August now, so I’m pretty sure a 25% drop before January would feel more painful for Lloyds shareholders than a run-of-the-mill correction.
Plus, the starting valuation isn’t high. For 2027, the forward-looking price-to-earnings ratio is 9.3, which is undemanding. There’s also a well-covered forward dividend yield of 4.1%, adding to the appeal of the shares.
Lloyds also launched a share buyback programme of up to £1.75bn in January, to run through to the end of 2026. So that could act as a bit of a buffer against a share price meltdown.
Should I buy Lloyds stock?
I already have HSBC shares in my portfolio, alongside FinTechs Wise and Nu Holdings. Personally, I see that as enough exposure to financials.
For those looking at Lloyds, I wouldn’t let ChatGPT sway an investing decision one way or the other. Its musings can be a little erratic (not to mention the occasional hallucination).
But looking at it today, I think it’s worth considering for a diversified income portfolio.
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Ben McPoland owns shares in HSBC, Nu Holdings, and Wise.
