Is this lofty Lloyds Bank price target justified?

A man walks past a branch of Lloyds Bank in London. Photo: David Cliff/NurPhoto via Getty Images.

Top-performing Lloyds Banking Group (LSE:LLOY) shares today divided opinion after a leading City firm sweetened its price target but another said it was time for investors to lock in profits.

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Deutsche Bank lifted its fair value estimate of the shares from 110p to 125p, having seen the lender continue its strong run from last year’s 61p to reach 112p in the wake of last week’s well-received annual results.

The City bank expects that the combined per share growth in tangible net assets and dividend will peak in 2026 at 17%, which would rank Lloyds among the highest of European banks.

Deutsche said: “Lloyds value creation is one of the standout qualities of the bank.”

In contrast, Shore Capital yesterday switched to a Sell stance as it believes that competitive pressures and risk of further taxation may impact the long-term outlook for return on tangible equity.

Guidance for this key industry metric was upgraded by Lloyds in last week’s results, with the lender now forecasting a figure of more than 16% in 2026.

This compared with the better-than-expected performance of 12.9% in 2025 results, which included 15.7% in the final quarter of the year.

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Shore noted after last week’s results that a valuation multiple of 1.7 times forecast 2026 tangible net assets was the highest for Lloyds shares since before the financial crisis.

It added a lower-than-expected impairment charge of £177 million and a positive asset quality ratio performance meant fourth-quarter results were a “fairly low-quality beat”.

Shore also highlighted the income tailwind of Lloyds’s structural hedge position, which more than offset the impact of lower base rates and continued mortgage margin compression.

UBS lifted its earnings per share forecasts for 2027 and 2028 by 5% and 7% respectively, driven by small increases to income forecasts and the impact of share buybacks.

This results in its target price rising to 108p for a stock on a multiple of 9.9 times forecast 2027 earnings, which is roughly in line with the wider sector.

UBS, which reiterated a Neutral recommendation, said: “While the stock offers 16% a year earnings per share growth, we believe this is priced in.”

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It notes that the next catalyst for shares will be the company’s updated strategic plan, which is due to be unveiled with second quarter figures on 30 July.

Dividend growth over the current strategic plan exceeded 80% versus 2021’s level, with the full-year award of 3.65p a share up 15% on 2024 and due to include 2.43p on 19 May.

Shore expects dividends and share buybacks totalling £17.9 billion over the next three years, which is equivalent to almost 30% of the current market capitalisation.

Deutsche Bank said today that it expects to see a step up in 2026’s growth in the combination of tangible net value plus distributions to levels among the highest in Europe.

It said the revenue and returns outlook was improving and that the lender’s structural hedge provided some certainty to support otherwise impressive growth trends.

This year’s peak of 17% will be driven by an improving return on tangible equity and normalisation of litigation charges before growth moderates to 13-14% by 2027-28.