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Despite the shaky economic conditions and widespread fears about the car finance scandal, i Lloyds (LSE:LLOY) share price has gone from strength to strength recently. In fact, over the past 12 months, the banking giant has seen its market share grow by 64%, surpassing the coveted 100p threshold.
Of course, the question now is, can Lloyds shares continue to climb higher? Here’s what the experts think.
February predictions
As one of the most popular companies in London Stock Exchangeinstitutional investors are constantly monitoring and revising their predictions for Lloyds. And earlier this month, analysts on both Deutsche Bank again Barclays improve their perception of the bank.
Instead of 110p, the Deutsche team is now tipping Lloyds shares to reach 125p in the next 12 months. And Barclays analysts appear to have reached the same conclusion, raising their target price from 120p to 126p.
Compared to where Lloyds shares are trading today, that represents a return of around 22.3% for investors today. And that’s before counting the extra profit from the sweet-looking 3.6% yield.
So, what is driving this renewed bullish belief?
Enhanced income momentum
Digging deeper into this speculation, a number of catalysts encourage high expectations. Most notably, the bank raised its guidance for interest income for 2026 from £13.6bn to £14.9bn, courtesy of improved loans.
At the same time, with the group’s interest rate protection efforts bringing margin expansion, the most significant return on tangible equity (RoTE) also increased from at least 15% to at least 16%, indicating higher profitability.
With all this in mind, it’s not that surprising to see Lloyds’ share price forecasts rising. But even the bullish teams at Deutsche and Barclays saw some concerns and risks.
What you can watch
While Lloyds’ banking operations are strengthening, the uncertainty surrounding the UK economy remains a concern.
Deutsche actually revised its outlook for British economic growth. And since Lloyds generates almost all of its profits from the UK, economic weakness can be an early indicator of lower lending volumes and higher loan defaults.
Meanwhile, prudent hedging may have helped to tighten the bank’s interest rate cap, but further tapering by the Bank of England in 2026 and beyond could start to put more pressure on lending.
Additionally, although concerns related to the illegal car sales scandal have begun to subside, it is important to note that the issue is far from over.
The FCA reform scheme is yet to be finalised. And although Lloyds has set aside £1.95bn in provisions to cover compensation claims, the bank has historically underestimated the cost of compensation – creating potentially negative consequences for investors in the long run.
What is the decision?
Overall, the renewed optimism for institutional investors does not sound misplaced. Even with potentially challenging headwinds, Lloyds appears well-positioned to continue on its current path of profit growth.
I think it is unlikely that the stock price will deliver the same 60% gains in 2026. But for conservative investors looking for solid returns and exposure to the British banking sector, Lloyds may be worth a closer look. And it’s not the only financial stock on my radar right now.
