Lloyds Banking Group (LSE: LLOY) shares are up 33% since the start of the new year, making it the best-performing UK bank in 2025.
In its 2024 full-year results, released on 10 March, it posted revenue of £58.22bn — up from £55bn in 2023. However, earnings fell slightly to £4.93bn from £3.92bn. Still, the share price climbed 10% in the week following the report, only to be dashed again by Trump’s trade tariffs in early April.
Fast-forward a couple of weeks and it’s back above 72p per share – only a few percentage points from its 52-week high.
So why not buy more shares now?
Lloyds is currently awaiting a pivotal Supreme Court verdict concerning the alleged mis-selling of car finance loans, a case that could significantly influence its financial standing and share performance. The timeline on the verdict is uncertain but should be more clear in the coming months.
The case alleges that car dealers received commissions from Lloyds’ Black Horse division without fully disclosing this to customers. A Court of Appeal ruling in October 2024 deemed such practices unlawful, prompting Lloyds to increase its compensation provisions to £1.2bn. Analysts suggest that the bank’s total liability could be between £3.2bn and £3.9bn — potentially exceeding £4bn in a worst-case scenario.
The financial implications are already hurting Lloyds’ profitability, as noted above with profits declining despite a rise in revenue. The bank has also suspended commission payments across its £15bn motor finance portfolio and is considering reducing its £2bn share buyback programme by half.
Naturally, the Supreme Court’s decision will be crucial in determining the extent of Lloyds’ financial responsibilities. A ruling against the bank could lead to substantial compensation payouts, which presumably would affect its financial health and shake investor confidence.
Not all doom and gloom
While the case is undoubtedly a black mark on Lloyds’ reputation, it’s well-established enough to recover from the ordeal. Recent performance is testament enough to how hard it’s working to pre-empt any negative outcome. To cut costs, it plans to close 254 branches within the year, including locations under Lloyds, Halifax, and Bank of Scotland brands.
Aside from the cost savings, the move highlights the bank’s commitment to meeting shifting consumer demands and technological advancements.
My hesitation isn’t simply an attempt to time the market and grab some low-priced shares. Although the Trump administration seems to be lessening its tariff threats, we’re not in the clear just yet. Global market’s remain rocky and in the coming months, any investment should be approached with caution.
Analysts seem to agree, although there remains some optimism — the average 12-month price target envisions a 7.3% rise to 78.4p. Broker forecasts are mixed, with Citigroup recently raising its target price from 61p to 71p and maintaining a Buy rating. JP Morgan however, set its target price to 62p and assigned an Underweight rating, indicating caution.
Overall, Lloyds remains a permanent fixture in my portfolio and I’m optimistic about its long-term prospects. Once all the political turmoil subsides and the outcome of the court case gives more clarity, I’d happily consider adding more shares to my holdings.
