UPDATE: The share price of Lloyds Banking Group (LSE: LLOY) has surged to 96p, nearing the critical £1 mark, raising questions about whether it’s time for investors to consider selling. This remarkable rise of nearly 75% since the start of the year has caught the attention of analysts and investors alike.
With the UK economy remaining sluggish but stable, Lloyds has benefited from high interest rates, allowing it to generate a robust £6.7 billion in underlying net interest income for the first half of 2025. This figure represents a 5% increase year-on-year, with earnings per share up 12% to 3.8p.
However, the outlook is becoming increasingly uncertain. Analysts from research firm Interpretiv predict potential interest rate cuts in the near future, which could pressure Lloyds’ profits. The looming UK Budget may also introduce significant tax increases, further heightening the risk of loan defaults.
As for valuation, projections indicate Lloyds will achieve earnings per share of 7.31p this year, resulting in a price-to-earnings ratio (P/E) of around 12. This is considered high for the bank, although next year’s anticipated earnings per share of 9.6p may lower the P/E ratio to below 10, making it more attractive.
Despite the share price climbing, concerns about reaching the psychological barrier of £1 persist. Analysts warn that this level could serve as a resistance point, potentially prompting many investors to cash out just below it. The last time Lloyds traded at this level was in 2008, indicating that there may be sellers poised to act.
In conclusion, the sentiment around Lloyds is currently neutral. While the stock is not screaming “sell,” there are indications that better investment opportunities may exist elsewhere in the market. Many analysts share this sentiment, advising caution as the stock approaches the £1 threshold.
Investors should remain vigilant as developments unfold in the UK economy and within the banking sector. The next few weeks could prove critical for Lloyds and its shareholders.
