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2025’s been a fantastic year for the Lloyds share price. The banking giant’s seen its market-cap rise almost 55%, pushing the shares to their highest point since the 2008 financial crisis. By comparison, the FTSE 100‘s only up around 14% over the same period.
In large part, this market outperformance stems from higher interest rates. With lending margins widening significantly, the bank’s earnings have surged, resulting in superior investor sentiment and analyst outlook. And yet, there’s another UK bank stock that’s doing even better.
Until recently, Close Brothers (LSE:CBG) has been a bit of a disaster. In fact, in 2024, the firm saw its market-cap shrink by over 70%. And yet, since January, the shares have begun recovering rapidly, delivering a 95% gain. That’s almost double what Lloyds has done, and 6.7 times more than the wider stock market.
What’s behind this impressive surge? And could this just be the tip of the iceberg?
Explosive recovery gains
As a quick reminder, Close Brothers is a specialist bank that offers lending, deposit-taking, and wealth management services. It primarily caters to small- and medium-sized businesses and, recently, it’s found itself in the media spotlight.
Like Lloyds, Close Brothers has been at the centre of the UK Motor Financing Scandal revolving around undisclosed commissions for car loans. The company was forced to set aside a massive chunk of capital to cover potential compensation claims, spooking investors, resulting in a multi-year decline.
However, in 2025, the Supreme Court overturned a previous ruling in this ongoing legal battle – a decision that was massively favourable to this business and eliminated a lot of legal uncertainty.
Close Brothers isn’t out of the woods yet. And it’s still put aside considerable capital provisions as the Financial Conduct Authority (FCA) explores a potential industry-wide redress scheme. But with the potential financial fallout now much smaller thanks to the Supreme Court, sentiment surrounding this bank’s improving.
Time to consider buying?
Beyond legal clarity, institutional analysts have also praised management for their disciplined approach to capital allocation. Strategic disposals have helped bolster the group’s financial health as well as deliver operational efficiencies. And subsequently, several experts have raised their share price targets.
| Analyst | Old Price Target | New Price Target |
| Jefferies | 470p | 520p |
| Peel Hunt | 480p | 510p |
| Liberum Capital | 460p | 495p |
| Canaccord Genuity | 470p | 500p |
With an average projection of 506p, that suggests more double-digit gains could be unlocked over the next 12 months.
Of course, forecasts are never set in stone. And even with a bullish stance, analysts have still highlighted important risks to consider. The FCA redress schemes remain a point of contention, especially if Close Brothers’ exposure exceeds its current capital provisions.
At the same time, being a bank that deals mostly with smaller businesses, it’s far more sensitive to the UK economic environment – something that’s lacking strength at the moment. Stubborn inflation and higher taxes have already hampered business growth, creating an indirect headwind for Close Brothers’ business.
Regardless, with more recovery potential seemingly on the horizon, contrarian investors could enjoy further recovery gains. That’s why I think a deeper investigation is warranted.
