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Lloyd’s Banking Group (LSE:LLOY) shares have grown 33% since the start of the new year, making it the UK bank that performs its best in 2025.
The full-year results for 2024, released on March 10, featured revenue of £58.2 billion, up from £55 billion in 2023. However, revenues fell slightly, down from £3.92 billion to £4933 million. Still, the stock price rose 10% the week following the report, but was shattered once again by Trump’s trade tariffs in early April.
Fast forward in a few weeks and returned at over 72p per share. This is just a few percentage points from the height of 52 weeks.
So why not buy stocks now?
Lloyds is currently awaiting a pivotal Supreme Court verdict on allegedly incorrect sales of automotive finance loans. This is a case where it may share its financial position and performance.
The incident alleges that the car dealer received a fee from Lloyd’s Black Horse division without fully revealing this to its customers. The October 2024 Court of Appeals ruling deemed such practices illegal and urged Lloyds to increase the compensation provision to £1.2 billion. Analysts suggest that the bank’s total liability ranges between £3.2 billion and £3.9 billion, potentially exceeding £4 billion in the worst-case scenario.
The economic implication is that it has already undermined Lloyd’s profitability as profits have declined despite increased revenue. The bank has also suspended the committee’s payments across its £15 billion motor finance portfolio and is considering cutting its £2 billion share buyback programme in half.
Naturally, the Supreme Court decision is important in determining the scope of Lloyds’ financial liability. A ruling against a bank could lead to significant compensation payments, which will likely affect its financial health and shake up the trust of investors.
Not all fate and darkness
The incident is undoubtedly a black mark on Lloyds’ reputation, but it is well established enough to recover from the ordeal. Recent performances are testimonies of how difficult it is to preempt negative outcomes. To cut costs, 254 branches are expected to close within the year, including locations under Lloyds. Halifaxand Bank of Scotland brand.
Aside from cost savings, the move highlights the bank’s commitment to meeting changing consumer demand and technological advances.
My hesitation is not merely trying to time the market and grab some low-cost stocks. The Trump administration appears to be alleviating the threat of tariffs, but we are not yet clear. The global market is rocky and we will need to approach every investment carefully in the coming months.
Analysts appear to agree, but there is optimism, but the average price target for 12 months is expected to rise by 78.4p, up by 7.3%. Broker predictions are mixed Citigroup Recently, we have increased our target price from 61p to 71p, maintaining our purchase rating. JP Morgan However, I set the target price to 62p, assign a low weight rating, and show caution.
Overall, Lloyds remains a permanent fixture in my portfolio and I am optimistic about its long-term outlook. Once all the political turmoil has subsided and the outcome of the lawsuit is clearer, I am happy to consider adding more shares to my holdings.
