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Few shares have traded for pennies for as long as Lloyds (LSE: LLOY). The ‘great recession’ brought the share price from £3 all the way down to 27p, and it has stuck below the pound mark ever since. That’s 17 years of anaemic growth and 17 years of a share price counted in pennies. That could all be changing however.
The shares are up 62% in a year. They’re up 224% in five years. The FTSE 100 bank is in a better place than it has been in decades. And its current 89p share price looks like it could keep on increasing for here. Is this the last time we ever see Lloyds shares under a pound?
Reasons
While we can never predict future crashes of a single stock or the market in general, I expect Lloyds to continue its ascent. Here are two of the reasons for this.
The first is inflation. Companies are a decent (though not perfect) hedge against rising prices. That’s because they can increase prices in line with inflation. This can create pushback for firms that sell items with stickers. But banks like Lloyds, whose products are often priced in percentage terms, suffer no such issues. Therefore, it’s natural to see a bank’s share price keep pace with inflation to some degree (all else being equal).
A second factor is buybacks. Share buybacks, where a company buys its own shares and takes them off the market, get a bad rep. Some investors prefer the ‘cash in hand’ of using that money for dividends.
But unless you believe markets don’t price in the changes from buybacks, then they will drive the share price higher. I don’t think it’s a coincidence that Lloyds shares have been rising following a £2bn buyback in 2024 and a £1.7bn buyback in 2025.
A buy?
Buybacks don’t spring out of thin air, of course. They are paid for by earnings, which is the ultimate driver of the share price. Whether Lloyds keeps humming along in this regard will come down to two things in my opinion.
The first is interest rates. Higher rates of borrowing (usually) mean bigger margins for banks. That rates are still at 4% and longer-term borrowing like gilts are even higher suggests this could work in Lloyds’ favour for years to come.
A second thing to keep an eye on is the UK economy. This is because Lloyds is much more domestic-focused than the other FTSE 100 banks. The mood around Britain’s economic performance is somewhat pessimistic, however. Ryanair chief Michael O’Leary went so far as to call the economy “doomed” under the current government.
Overall, I think there’s plenty of good here. There’s even a fair chance we won’t see Lloyds trade for pennies for much longer, too. I’d call it one to consider.
