TLDR
- Lloyds Banking Group (LYG) shares rose 4.41% on Tuesday, closing at $3.55
- JPMorgan raised its price target for LYG to £62 from £55, while maintaining an ‘underweight’ rating
- Lloyds appointed Natasha Sayce-Zalem as director of digital and business platforms for its Homes business
- The bank set aside £1.15 billion to cover potential motor finance mis-selling claims
- £10,000 invested in Lloyds shares at the start of 2025 would now be worth £12,100
Lloyds Banking Group plc (NYSE:LYG) shares jumped 4.41 percent on Tuesday, closing at $3.55 amid a generally cautious market. The rise came following a price target upgrade from JPMorgan, which raised its target for LYG to £62 from £55, while keeping an ‘underweight’ rating on the shares.
The stock’s performance stood out on a day when most major indices showed little movement. The Dow Jones finished with a modest gain of 0.37 percent, while the S&P 500 decreased by 0.47 percent and the tech-heavy Nasdaq fell by 1.37 percent.
Investor confidence in Lloyds appears to be growing despite the bank’s recent financial results showing a decline in annual profits. Net income for the full year 2024 dropped by 19 percent to £4.477 billion from £5.518 billion in 2023. However, fourth-quarter results showed some improvement, with net income increasing by 3.4 percent to £4.378 billion compared to £4.232 billion in the same period of 2023.
The bank also announced a new addition to its leadership team on Tuesday. Natasha Sayce-Zalem, formerly the global head of partner engineering for Amazon Prime Video, was appointed as director of digital and business platforms across Lloyds’ Homes business. In her new role, Sayce-Zalem will focus on accelerating the digitization of mortgage processes across the bank’s brands and channels.
This appointment comes as Lloyds continues with its planned closure of 130 high-street bank locations across the UK this year, part of the banking industry’s broader shift toward digital services.
The motor finance mis-selling scandal continues to be a concern for Lloyds. The bank has now set aside a total of £1.15 billion to cover potential claims related to this issue. In its full-year 2024 results, published on February 20, the board allocated an additional £700 million for potential impairments, adding to the £450 million previously reserved.
Lloyds described this £1.15 billion figure as its “best estimate” of potential liabilities. However, some market analysts have suggested the final cost could be substantially higher, potentially reaching billions of pounds. Investors are now awaiting a Court of Appeal hearing in April about the scope of a review into the scandal, which could potentially drag on for months or years.
Despite these challenges, Lloyds has taken steps to reassure investors about its financial stability. The bank announced a £1.7 billion share buyback program, which appears to have successfully demonstrated to the market that it can absorb potential losses from the mis-selling scandal. Additionally, the bank increased its dividend by 15 percent.
These moves helped put a positive spin on what might otherwise have been viewed as disappointing financial results. Beyond the drop in pre-tax profits, Lloyds also reported that its net interest margins—the difference between what it pays savers and charges borrowers—fell 16 basis points to 2.95 percent.
The strong performance of Lloyds shares so far in 2025 has delivered solid returns for investors. According to market analysis, £10,000 invested in Lloyds at the start of the year would now be worth approximately £12,100, representing a 21 percent gain in less than two months.
Lloyds shares have increased by 46 percent
Over the past 12 months, Lloyds shares have increased by 46 percent. While this is a strong performance, it lags behind some of its banking competitors. During the same period, Barclays has seen its shares rocket by 87 percent, while NatWest has posted an even more impressive gain of 93 percent.
Even after the recent rally, Lloyds shares still appear reasonably valued by some common metrics. The stock currently trades at a price-to-earnings (P/E) ratio of 10.7, which is below the blue-chip average of around 15. However, its price-to-book ratio has been steadily increasing, rising from 0.4 a couple of years ago to 0.9 today, suggesting the shares may be approaching fair value.
Looking ahead, analysts expect the dividend yield to increase from the current 4.75 percent to 5.01 percent in 2025 and 5.73 percent in 2026, which may attract income-focused investors. The median one-year price target from 18 analysts covering the stock stands at just under 69p, representing a modest potential increase of 2.8 percent from current levels.
Lloyds Banking Group plc shares rose 4.41% on Tuesday after JPMorgan raised its price target, despite facing challenges from the motor finance mis-selling scandal and declining annual profits.
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