Lloyds‘ (LSE:LLOY) shares have loved a exceptional resurgence in recent times, with its share price rocketing by over 37% in 2025 alone, constructing on robust beneficial properties in 2024. 

This rally has been supported by strong web curiosity earnings and a resilient web curiosity margin of over 3%. A key consider traders’ optimism has been Lloyds’ efficient hedging methods, which have allowed the financial institution to lock in greater curiosity earnings for future years. This supplies a buffer in opposition to potential price cuts and guaranteeing extra predictable earnings.

Nonetheless, Lloyds stays intently tied to the UK financial system. In contrast to some bigger world rivals, it lacks a major funding banking arm, making its fortunes particularly delicate to home financial developments and client credit score cycles. 

This focus has helped Lloyds keep a transparent enterprise mannequin, however it additionally means the financial institution’s uncovered to any downturn within the UK market.

Is Lloyds nonetheless good worth?

I consider the FTSE 100 banks largely commerce consistent with one another. Nonetheless, evaluating Lloyds’ ahead valuation to smaller friends reveals a barely completely different image.

Lloyds trades at a ahead price-to-earnings (P/E) ratio of 11.9 instances for 2025, falling to 7.1 instances by 2027, with a forecast dividend yield rising from 4.5% to over 6%. 

So how does this evaluate to smaller UK-listed banks?Let’s begin with FTSE 250 peer Lion Finance Group. The Georgian financial institution appears even cheaper, with a 2025 P/E of simply 5 instances and an analogous dividend yield, dropping to a P/E of three.9 instances by 2027.

Arbuthnot Banking Group‘s an even smaller bank. This one’s UK-based and has a protracted historical past. It additionally trades at a reduction to Lloyds, with a 2025 P/E of seven.4 instances and a yield above 5.5%. This P/E falls beneath 5.5 instances by 2027. It’s not fairly as low cost as Lion Finance, however that’s doubtless a mirrored image on the relative stability of the UK.

Whereas Lloyds provides a strong yield and a steadily enhancing payout, traders must be cautious about chasing the bottom P/E ratios. Lion Finance, for instance, is predicated in Georgia, the place political and financial dangers could justify its cheaper valuation. Equally, Arbuthnot’s smaller measurement and area of interest focus could carry larger volatility.

Finally, Lloyds stays a bellwether for the UK financial system, providing dependable earnings and a transparent progress path. But for worth hunters keen to just accept greater danger, some smaller banks could provide even larger potential.

The underside line

Personally, I’m persevering with to carry my Lloyds shares, seeing as they’ve nearly doubled in worth over the previous two years. One cause for that is the dividend, which is round 7% relative to my buy price. I’m additionally acutely aware of focus danger, however I nonetheless consider Lloyds must be thought-about by traders at the moment. I’ve additionally bought shares in Arbuthnot just lately, noting its low cost to bigger friends.