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Lloyds Banking Group (LSE:LLOY) shares were one of the darlings of the UK stock market in 2025. Over the course of the year, the British bank saw the value of its shares rise by 79%. They’re now changing hands for more than £1 for the first time since the global financial crisis destroyed the bank’s valuations (and most others) in 2008.
But could they hit £1.50 by the end of 2026? Let’s take a look.
An amazing year
The rally meant shareholders had a tremendous 2025. A £10,000 investment at the start of the year would have grown to £17,900 by 31 December. And there was the added bonus of some dividends as well. With the bank paying 3.33p a share, owners of the bank would have received £602. Overall, that’s an impressive 85% return on the initial £10k.
What next?
But to get to £1.50 a share, something significant needs to happen. With a current (19 January) share price of around £1, investors will need to see that the bank’s future earnings heading 50% higher than they presently believe they will. Such a high level of growth’s unlikely to come organically, certainly not over the next 12 months. And compared to 2024, analysts are already expecting a 79% improvement in earnings per share (EPS) by 2027.
Instead, the only way I see a 50% rise is from the acquisition of a rival, which seems unlikely. Usually, there’s a bit of speculation before a takeover but there’s been no recent UK banking sector chatter.
The ‘expert’ view
And if the analysts are to be believed, Lloyds’ share price is unlikely to increase this year. The consensus view is that £1’s a fair value. Having said that, Barclays‘ investment arm raised its one-year price target to 120p on 7 January.
Based on their forecasts, it sees a “compelling” valuation of less than seven times 2028 earnings compared to an average of nine for European banks. A Barclays’ analyst wrote: “We expect this improving outlook to come into sharper focus at this summer’s strategy update, alongside a potential move to half-yearly buybacks“.
Unconvinced
If the bank comes close to achieving the growth in earnings that’s predicted then I’ll be very surprised. In my view, the forecasts are far too optimistic, especially for a business that earns nearly all of its income from the UK.
In my opinion, the performance of the British economy’s going to have to go off the charts for Lloyds to grow EPS by 70% by 2028.
Personally, I think Lloyds is a well-run business with an impressive management team. And it has lots going for it, including its dividend (no guarantees). But at just over 100p, its share price is too high for my liking.
Although I’ll admit I was proven wrong for most of 2025 when I said the bank’s shares were over-priced, and yet the rally continued. But I can’t see them getting anywhere close to 150p this year. Instead, I’m looking for other growth opportunities on the UK stock market. And fortunately, there are lots to choose from.
