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LLOY: Future Earnings Upgrades Will Not Justify Richer Multiple

UK Mortgage Risks And Rising IT Costs Will Hamper Outlook

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LLOY
AnalystLowTarget
Not Invested
Published 06 Jun 2025

Update shared on 18 Dec 2025

Fair value Increased 7.20%
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Analysts have raised their price target on Lloyds Banking Group by approximately 7 percent, citing a slightly lower discount rate, marginally stronger revenue growth expectations, and improved forecast profit margins that together support a modest uplift in the bank's future price to earnings multiple.

What's in the News

  • Lloyds raised its 2025 net interest income guidance to around GBP 13.6 billion, signaling slightly stronger profitability expectations than previously indicated (company guidance).
  • The bank completed a major share buyback program, repurchasing 1.8 billion shares, or 2.98% of its share capital, for a total of GBP 1.4 billion under the plan announced in February 2025 (company announcement).
  • Lloyds is reportedly preparing to unwind its wealth management partnership with Schroders and exploring a purchase of Schroders 49.9% stake in Schroders Personal Wealth to gain full control and expand its affluent-client offering (market reports).

Valuation Changes

  • The fair value estimate has risen modestly to 0.70 from 0.65, implying a slightly higher intrinsic valuation for Lloyds shares.
  • The discount rate has edged down slightly to about 8.43 percent from 8.45 percent, marginally increasing the present value of projected cash flows.
  • Revenue growth assumptions have risen slightly to around 8.13 percent from 7.99 percent, reflecting a small upgrade to top line expectations.
  • The net profit margin forecast has increased moderately to roughly 23.49 percent from 22.23 percent, supporting a stronger earnings outlook.
  • The future P/E multiple has ticked up slightly to about 9.30x from 9.21x, indicating a minor rerating of Lloyds forward earnings.

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