Image source: Getty Images
The Lloyds (LSE:LLOY) share price is on a roll so far this year, with the shares climbing almost 30% since January. That’s despite looming uncertainty regarding the car-finance mis-selling scandal that management has set aside £1.2bn to settle any potential complaints.
Last month, the bank, along with other involved finance lenders, went to plead their case at the UK Supreme Court. And the judge’s decision is expected to emerge in the coming weeks. Depending on the outcome of this case, the Lloyds share price could either be sent flying, or tumble back down, likely undoing all the progress made this year.
It’s a complicated situation. So what are the experts saying?
Analyst forecasts
The opinion of most analysts is for investors to sit tight and wait for the court ruling to be revealed. At least that’s what the 11 out of 19 Hold recommendations would imply. However, not everyone’s being as conservative. Notably, there are a handful of analysts who are seemingly bullish on the bank despite the uncertainty surrounding this business.
| Institutional Analyst | Recommendation | 12-Month Share Price Target |
| Citigroup | Buy | 71p |
| BNP Paribas | Outperform | 72p |
| Jefferies | Buy | 76p |
| Deutsche Bank | Buy | 83p |
| HSBC | Buy | 85p |
Digging into the reports, there appear to be several common themes. The bank’s dominant position in retail and commercial banking’s expected to deliver greater profitability through efficiency gains and operating leverage.
The expected reduction in UK interest rates could prove to be an unhelpful headwind in maintaining elevated net interest margins. However, lower interest rates also act as a catalyst for the British economy. And with business activity expected to ramp up, Lloyds could offset this impact with higher lending volumes to businesses as well as consumers, particularly in the property market.
Taking the average of these price forecasts, it suggests that the Lloyds share price could sit around 79.4p by this time next year. Compared to current trading levels, that implies a potential capital gain of 9.9%.
What could go wrong?
I’ve already highlighted the risk of an unfavourable outcome regarding the Supreme Court. However, even if the ruling’s in Lloyds’ favour, there are still other threats for investors to consider. As pointed out by BNP Paribas, Lloyds generates a significant portion of its income from residential mortgages – a field where there’s ample competition.
Then there’s the question of British economic growth. The UK’s GDP’s struggled to meaningfully expand over the last decade, even when interest rates were near zero. As such, the suspected boost to lending activity from interest rate cuts in 2025 could fail to materialise. And if consumer spending remains weak, the rate of bankruptcies could accelerate despite economic stimulus from the Bank of England.
The bottom line
In the long run, Lloyds doesn’t look like it’s going to disappear any time soon. The bank remains a critical piece of UK financial infrastructure, and despite its weaknesses, it has ample financial resources to weather an economic storm. However, its growth prospects just aren’t that compelling given all the short-term uncertainty surrounding this enterprise.
Therefore, despite the bullish attitude of some leading analysts, I wouldn’t consider buying and think keeping this business on a watchlist could be the prudent move for now.
