UPDATE: The share price of Lloyds Banking Group (LSE: LLOY) has surged to nearly £1, raising urgent questions for investors about whether now is the time to sell. Just weeks ago, the stock reached 96p, marking a remarkable rise of approximately 75% since the beginning of the year. This robust performance has many asking if it’s time to bank profits.
Recent data shows that business conditions for Lloyds have remained favorable. With UK interest rates remaining relatively high, the bank has seen a healthy spread between lending and borrowing rates. Despite a sluggish UK economy, Lloyds has avoided a spike in loan defaults, bolstering investor confidence. In the first half of 2025, Lloyds generated underlying net interest income of £6.7 billion, a 5% increase year-on-year. Earnings per share (EPS) stood at 3.8p, up 12% from the same period in 2024.
However, the outlook is becoming increasingly complex. Analysts from research firm Interpretiv predict potential cuts to UK interest rates later this year and into next, which could squeeze Lloyds’ profits. Additionally, if the UK government introduces significant tax increases in the upcoming budget, loan defaults could rise, further impacting the bank.
Looking ahead, analysts forecast an EPS of 7.31p for this year, resulting in a price-to-earnings (P/E) ratio of about 12. This valuation is considered high for Lloyds, leading some to question whether there is substantial value left in the stock. Next year, EPS is projected to reach 9.6p, potentially lowering the P/E ratio below 10, making it more attractive for investors. The average analyst price target remains at 97p, suggesting limited upside.
The stock’s dividend yield has also dipped below 4%, as the recent share price increase has reduced its income appeal.
As the share price approaches £1, many investors are wary of potential resistance at this psychological milestone. Historically, such significant price points often trigger selling activity, and with Lloyds not reaching this level since 2008, it’s uncertain how investors will react.
In summary, while Lloyds is currently on an upward trend, the immediate outlook remains cautious. Analysts and market observers express mixed feelings, with some advocating for profit-taking while others see long-term potential. As the situation develops, investors should closely monitor these factors to make informed decisions.
Stay tuned for further updates as this situation unfolds and the market reacts.
