The Lloyds Banking Group (LSE:LLOY) share price has loved robust positive aspects in 2024. At 53p per share, it’s up 10.1% since 1 January.

However the FTSE 100 financial institution’s fallen sharply for the reason that finish of October. This unfavorable momentum is a nasty omen for present buyers heading into 2025.

So what does the New 12 months maintain for the Black Horse Financial institution? And may I purchase Lloyds shares for my portfolio?

The brand new PPI scandal?

Let’s start by exploring the current drop in its share price.

You’ll most likely keep in mind the mis-selling scandal that rocked the banking trade through the 2010s. Companies had been discovered responsible of wrongly promoting cost safety insurance coverage (PPI) on an industrial scale. Lloyds alone was on the hook for a jaw-dropping £21.9bn.

As we speak one other mis-selling story is spooking buyers, this time regarding the sale of motor finance. It’s early days, however buyers worry one other costly scandal is brewing, one by which Lloyds is as soon as once more stated to be a significant participant.

The Footsie financial institution put aside £450m to cowl potential prices from a Monetary Conduct Authority (FCA) investigation. But it surely’s put this underneath assessment following a current court docket ruling: in brief, this deemed fee from lenders to automotive sellers with out prospects figuring out to be unlawful.

RBC Financial institution analysts suppose Lloyds could need to cough up to £3.9bn in penalties. This could be small potatoes compared to the PPI scandal. But the issue isn’t going away quickly, and estimates might proceed to rise. This might hold Lloyds’ share price underneath vital strain.

Bother elsewhere

The automotive finance saga would be the greatest affect on Lloyds shares subsequent yr. But it surely’s not the one fear I’ve.

My different considerations embody:

• A mixture of weak mortgage development and rising credit score impairments because the UK economic system struggles.
• Slumping internet curiosity margins (NIMs) because the Financial institution of England cuts rates of interest.
• The menace posed by challenger banks and constructing societies to buyer demand and margins.

There are patches of sunshine amid the gloom, nevertheless. A gradual housing market restoration is an efficient signal for Lloyds. The financial institution’s digital transformation initiatives also needs to proceed to bear fruit.

However on stability, I believe Lloyds and its share price might face a tricky time in 2025.

Right here’s what I’m doing

That’s to not say that Metropolis analysts at the moment share my pessimistic take. The 18 quantity crunchers with scores on the financial institution have slapped a 12-month price goal of 64.94p per share on the financial institution.

That represents an 22% premium to present ranges.

But however, these 18 analysts are hardly spinning cartwheels over Lloyds. Ten have slapped a Maintain ranking on the agency. One considers it to be a Promote. Solely seven imagine it to be a Purchase.

This matches the broader market’s lukewarm view of the financial institution, as mirrored by its rock-bottom valuation. A ahead price-to-earnings (P/E) ratio of 8.1 occasions is effectively under the FTSE 100 common of 14.3 occasions.

I imagine the market and the Metropolis could take an more and more bearish view of Lloyds, which in flip might push its share price sharply decrease.

All issues thought of, I’d fairly purchase different low-cost UK shares proper now.