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Hardly anybody predicted the spectacular rise in the Lloyds (LSE:LLOY) share price during the past 12 months. At 101.5p per share, the FTSE 100 bank is 64% more expensive than at this point last year.
With the key £1 psychological and technical level now breached, more meaty gains are being tipped for Lloyds shares. The breakneck price momentum of the last year has also prompted analysts to ramp up their forecasts in recent weeks.
One analyst reckons the bank will reach 120p over the next 12 months. That’s an 18% increase from today’s levels. That’s much lower than what shareholders have recently enjoyed. But with predicted dividends added, it still suggests a healthy total return of roughly 23%.
The question is, can Lloyds’ share price really surge for a second straight year? Or are estimates like this just wishful thinking?
More price targets
It’s worth noting that this is only one of 18 forecasts right now. And there are some stark differences among brokers — one suggests prices will fall 18% over the next year, to 84p per share.
Yet estimates are largely positive for Lloyds, even if the consensus target is far less lofty than 120p. The average 12-month estimate is 106.9p, up ‘just’ 5% from today.
This more modest price target perhaps isn’t surprising following those stunning recent gains. It’s possible that the market will pause for breath. Profit taking among investors might also set in to clip momentum. What’s more, Lloyds shares also look really pricey right now, which could also limit further upside.
Today they trade on a price-to-book (P/B) ratio of 1.5. That’s miles above the 10-year average of 0.9, and shows the bank trading at a meaty discount to the value of its assets. At this level, one can argue that the bull case is more than baked in at current prices.
Home comforts
That said, I — like most people — didn’t predict the surge in Lloyds’ share price in 2025. And I could be wrong again.
Renewed strength in the housing market is a good omen for Britain’s biggest mortgage provider. Average home prices rose at their fastest pace since mid-2015 this month, according to Rightmove. Homebuyer demand could leap given the likelihood of more interest rate cuts through 2026.
Further rate trimming could have other significant benefits, lifting demand for Lloyds’ other products and reducing loan impairments. Lower interest rates can have a negative effect on banks’ margins. But the structural hedge in place here will limit any negative ramifications.
Should I buy Lloyds shares?
I’m more concerned about other dangers facing Lloyds faces over the next year. Risks like rising competition, a struggling UK economy and regulatory pressure are significant. And in my opinion, Lloyds’ enormous valuation fails to properly reflect them. It’s a fragile set-up that could prompt a sharp price correction if news flow turns negative and/or trading conditions weaken.
For this reason, I won’t buy Lloyds shares for my own portfolio. That said, I think the FTSE 100 bank may be worth a close look for more risk tolerant investors.
