Lloyds forecast: will Lloyds share price return to £1? Third party data forecast
Lloyds is a multinational banking institution whose shares have been trading in a range of around 38p to 53p in recent times. In this piece, you’ll find discussion of the share price – with updates added from third-party price forecasts. It was 2008 since it last happened – but when will Lloyds shares return to £1?
When will Lloyds shares reach £1?
Shares of Lloyds Banking Group have struggled to find their footing in the past, but the company’s strong fundamentals have made it an attractive investment, and investors are finally catching on. The share price surpassed the 50p mark at the end of March for the first time in over a year as appetite for stocks has increased with resilient macroeconomic data. But investors want to know, even if it’s a level not seen since 2008: when will Lloyds shares return to £1?
Fundamentally, the bank is strong, with a widely recognisable brand and a large customer base. Earnings have remained robust, with post-tax profits at £5.5bn and £3.9bn in 2023 and 2022 respectively. Interest income – a key revenue source for banks – has grown consistently for the past five years, increasing 30% from 2019 to 2023.
Even so, market sentiment has been holding the share price back, resulting in a price-to-earnings (P/E) ratio that makes the company look undervalued. But appetite in the UK banking sector seems to be turning. Interest rates are expected to start dropping soon, which could be a headwind for banks, but it is also expected to boost the wider market, which is likely to reflect on Lloyds share price eventually.
The issue doesn’t seem to be so much with the company’s fundamentals, but rather with investor concerns about loan defaults if the economy continues to perform weakly. After all, the GDP data confirmed that the UK economy entered a technical recession in the second half of 2023, with two consecutive quarters of negative growth. And whilst growth is struggling, inflation continues to be an issue, especially in the services sector, where there are still upward pressures on wages. Markets now only have one rate cut fully priced in for 2024, a stark contrast to where the year started.
So, there is reason to believe that investors are nervous about the long-term outlook for the UK economy, and that has an impact on consumers and their ability to pay back loans. For this reason, the likelihood of getting Lloyds shares back up to £1 is pretty slim until the economic uncertainty clears up, and that is unlikely to happen this year.
Technically, Lloyds shares need to clear a key resistance range between 54 and 56p before any further momentum can be achieved. The last three times it has ventured into this area the Relative Strength Index (RSI) has been heavily overbought, which has dampened the bullish appetite. The fact that the RSI has pulled back to 50 whilst the price has remained above 50p per share, suggests the bearish reversal could be lacking support.
Find out more about the macroeconomic drivers of this stock and how to trade Lloyds CFDs here.
Lloyds Banking Group daily chart
Past performance is not a reliable indicator of future results.
Lloyds share price forecast: Targets for 2024 and beyond
Lloyds share price forecasts from third parties in late 2023 focused on projections for a 12-month timeframe, taking us well into 2024. Citigroup forecasted the price to get to 83p, and Goldman Sachs, predicted 80p. However, JP Morgan was less convinced on the prospects, predicting a price of 42p for the stock. The reason for the projected rise included the steep rise of UK interest rates, which offers the opportunity of higher net interest income.
However, the projection of 42p was based on the net interest margin at the time not meeting expectations. The prediction for a higher share price is somewhat linked to economic performance in the sense that a stronger economy may be more reason not to cut rates as conditions can withstand higher rates. Also, persistent inflation may also delay cuts or even increase the chance of another hike, which could enable banks to profit from higher-cost loans. However, a weaker economy may be an argument for cutting rates, potentially impacting banks’ net interest income.
Lloyds fundamental analysis: Q1 2024 earnings
On 24 April, Lloyds reported its financial results for the first quarter of 2024.
According to the bank, total income for the first three months was £4.3m, a decrease of 5% in 2023, primarily reflecting lower net interest income in the quarter.
Net interest income of £3.1m was down 12% from the same period in 2023. The lower margin reflects expected headwinds due to deposit churn and asset margin compression, particularly in the mortgage book as it refinances in a lower margin environment.
In terms of moving forward, the Group’s base case scenario is for a slow expansion in GDP and a rise in the unemployment rate alongside modest changes in residential and commercial property prices. Following a reduction in inflationary pressures, Lloyds expects the UK bank rate to be lowered during 2024. It also acknowledges that risks around this base case economic view lie in both directions and are largely captured by the generation of alternative economic scenarios.
Company history
Lloyds Banking Group, currently the third-largest retail bank in Britain behind Barclays (BARC) and HSBC (HSBA), was founded in Birmingham in 1765. It expanded during the 18th and 19th centuries by taking over a number of smaller banking businesses.
In 1995, the bank merged with the Trustee Savings Bank (TSB) to form Lloyds TSB — at that point the largest bank in the UK by market share, and the second-largest (to HSBC, which had taken over the Midland Bank in 1992) by market capitalisation.
Amidst the credit crunch in 2008, the Lloyds TSB Group took over HBOS – itself formed by a merger between Halifax plc and the Bank of Scotland in 2001. The UK government allowed the deal to bypass competition law with the goal of avoiding another Northern Rock-style collapse. After the rescue of HBOS, the Lloyds TSB Group was renamed Lloyds Banking Group – the name it continues to hold to this day.
In 2009, the British government took a 43.4% stake in the group following the liquidity crisis. The European Commission reacted to the move by ruling that the group must sell a portion of its business by November 2013, as it interpreted the stake purchase as state aid. In March 2017, the British government confirmed that its remaining shares in the group had been sold.
Lloyds Banking Group currently has 26 million customers in the UK and posted statutory profits after tax of £5.9bn in 2021. The group is listed on the London Stock Exchange (LSE) and is a constituent of the benchmark FTSE 100 index.
Lloyds earnings in 2023
On 16 February, Lloyds reported its financial results covering the entire 2023 fiscal year. During the period, underlying net interest income of £13.8bn was up 5%, with a net interest margin of 3.1%, in line with guidance. Statutory profit after tax was £5.5bn (£1.2bn in the fourth quarter) with net income of £17.9bn up 3%.
On the costs front, the bank reported operating costs of some £9.1bn and total costs of around £9.8bn.
The Board recommended a final ordinary dividend of 1.84p per share, resulting in a total ordinary dividend for 2023 of 2.76p per share, up 15% on the prior year.