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What might an investment in Lloyds Banking Group (LSE: LLOY) shares be worth by the end of 2027? Bank valuations are tricky. But there are a few ways we might come up with some rough-and-ready predictions.
Broker targets
One is to check the current broker price target on the shares. Right now, there’s a high target of 103p — a nice 25% ahead of today.
At the other end, someone has a 53p price on the stock, for a 35% fall. But seeing as no broker has Lloyds as a Sell, I suspect that’s just an old one that never got updated.
Rising trend
The trend has been steadily up for the past two years, and the average suggests about 90p for a 10% increase. But if we narrow it down to the most current recommendations, I estimate a recent average at somewhere between that 90p and the top 103p.
It could mean a rise of close to 18%, to turn a £10,000 investment into £11,800.
Longer-term forecasts
There’s a problem with that — these are short-term outlooks. The Lloyds price target range is very different now from where it was two years ago. And it could change dramatically between now and 2027.
Another approach is to use actual earnings forecasts. And base it on the current price-to-earnings (P/E) valuation of the stock. To start out, we’re looking at a forward multiple of 12 for the current year.
Lloyds has had a few years of weak earnings, and the per-share measure fell in 2024. City analysts see 2025 as modestly better. But they don’t expect a real earnings recovery kicking off until 2026. But if it gets going as predicted, we could see earnings per share climb nearly 80% between 2024 and 2027.
Steady P/E?
For the P/E to remain the same, the share price would need to increase by around 60%. It could mean something close to 131p by 2027. That’s well ahead of the most optimistic current price estimate, and could turn £10,000 into £16,000.
That raises another problem. The current P/E will be based in those earnings growth forecasts up to 2027. And if, by then, the City folk don’t see the same rate of growth in the following years, I’d expect the market to put a lower value on Lloyds shares.
Pulling a guess out of the air, what about a 2027 P/E of 10? I think that could be fair for banks in the long term. And it could mean a 33% rise between now and then — suggesting a final prediction £13,300.
Bottom line
What should we take from all this?
I won’t put too much on any specific estimates. For one thing, we haven’t looked directly at any of the things that could happen in the real world. And the economy, especially when interest rates fall again, might not be that friendly towards lenders like Lloyds. Price dips are a definite possibility.
But this can help get a feel for where the general trend might go. And on that score, Lloyds is still a firm hold for me. I’ll even consider buying more.
