Regardless of fears over the UK economic system, rising inflation, and worries over a recent mis-selling scandal, the Lloyds (LSE:LLOY) share price continues to strengthen.

At 66.7p per share, the FTSE 100 financial institution is up 21% for the reason that begin of 2025. This takes good points over the previous yr to a whopping 53%.

But following its speedy ascent, analysts imagine Lloyds might battle to proceed its surge. However how lifelike are dealer forecasts for Lloyds shares? And may traders take into account snapping the hovering financial institution up at the moment?

Secure outlook

It’s vital to say that some analysts’ predictions for the subsequent 12 months differ wildly. One believes the Footsie agency will fall 20% in worth over the subsequent 12 months, to 53p per share.

One other believes shares will soar one other 26%, to 84p.

Nonetheless, the broad consensus is that Lloyds’ share price will stay steady over the subsequent yr. The typical price goal amongst 18 brokers is 65.8p per share. That is 1% decrease than present ranges.

Operating out of street?

On paper, it’s arduous to see how Lloyds shares will proceed to climb with out shifting into ‘overbought’ territory.

With a price-to-book (P/B) worth of 1, traders are paying precisely what the financial institution’s web property are value.

Moreover, Lloyds’ price-to-earnings (P/E) ratio of 9.8 occasions is now above its five-year common of seven.7 occasions. Given its unsure progress outlook in 2025 and past, this valuation seems to be fairly juicy to me.

In actual fact, I imagine Lloyds’ latest share price surge now places it susceptible to a possible pullback.

Robust situations

One concern I’ve pertains to the gloomy outlook for the British economic system and what this might imply for Lloyds’ earnings. In contrast to different FTSE 100 banks like Barclays and HSBC, the corporate doesn’t profit from abroad publicity to counter issues at residence.

This weighed on income progress in 2024, with web revenue falling 5% to £17.1bn. With the Financial institution of England (BoE) predicting UK GDP progress of simply 0.75% this yr, and competitors from challenger banks and constructing societies rising, established banks will probably battle to develop the highest line.

Income may additionally undergo if (as anticipated) rates of interest proceed falling. Lloyds’ web curiosity margin dropped 16 foundation factors final yr to a paper-thin 2.95%, reflecting partially latest BoE price cuts and people aforementioned aggressive pressures.

On the plus aspect, rate of interest reductions present an financial enhance that might assist the financial institution’s revenues and restrict mortgage impairments. Enhancing situations within the housing market are one other constructive signal.

However on stability, exterior elements imply it may very well be one other troublesome yr for the financial institution.

Automotive crash coming?

But arguably the financial setting isn’t the most important hazard to Lloyds’ earnings — and by extension, its share price — in 2025.

Traders additionally want to contemplate the potential of eye-watering penalties if the financial institution is discovered responsible of mis-selling automotive finance. It beforehand put aside £450m to cowl the potential fallout of a Monetary Conduct Authority (FCA) investigation. This has been hiked by one other £700m, Lloyds introduced this week.

However the eventual price may very well be even increased given the financial institution’s place as market chief. Scores company Moody’s predicts the ultimate price to the sector may very well be as excessive as £30bn.

All issues thought-about, Lloyds shares won’t be your best option for traders at the moment. I believe they need to take into account exploring different UK shares as a substitute.