Lloyds shares have been on a strong run this year. The stock is now trading at its highest level since September 2008. It has risen for 12 months in a row and is up around 430% from its 2020 low.
This rally has pushed Lloyds’ market value above $80bn. That makes it the 14th largest company in the UK. Despite the strength, some signs suggest the stock could slow down or pull back soon.
Lloyds is not alone in this rise. Other UK banks have also surged. Barclays shares are up nearly 80% over the past 13 months. NatWest has gained more than 60% in the same period. Several European banks have also been climbing steadily, including Unicredit, Societe Generale, and BNP Paribas.
One reason for Lloyds’ rise is its stable performance during a difficult economic period. The UK economy is dealing with stagflation. This means high inflation and weak growth at the same time. Recent data showed the economy shrank by 0.1% in October. Even so, Lloyds has managed to keep its business steady.
The stock has also benefited from hopes that the motor finance issue is nearing an end. After a Supreme Court ruling last year, Lloyds set aside £800m for motor finance commission costs. This pushed the total charge to more than £1.7bn. Investors now believe the worst of this problem may be behind the bank.
In its latest results, Lloyds reported a statutory profit after tax of more than £3.3bn. This was down from £3.8bn a year earlier. The drop was mainly due to the motor finance charge rather than weakness in its core business.
Management also raised its outlook. The bank now expects underlying net income of £13.6bn. It is targeting a return on tangible equity of 12%. This improved guidance has added confidence among investors.
Lloyds has continued to reward shareholders. It has paid regular dividends and bought back shares. In 2025, the bank completed £1.75bn in share buybacks. Its dividend yield has climbed to around 4% to 5%.
The bank’s capital position remains strong. It ended the last quarter with a CET1 ratio of 13.8%. This is expected to fall to around 13% this year, which is still seen as healthy.
The main concern now is valuation. Lloyds shares are no longer cheap. The price to earnings ratio stands at 16. The forward ratio is around 12. Both are higher than the bank’s historical averages.
Investors are now looking ahead to the next earnings update on January 29. Those results will give a clearer picture of whether the rally still has room to run.
From a technical point of view, warning signs are appearing. The stock has been in a strong uptrend, but momentum looks stretched. Indicators suggest buying pressure may be fading.
The Relative Strength Index is forming a pattern that often signals a reversal. This usually happens when prices stop rising and start to fall. Another indicator, the Percentage Price Oscillator, is also showing a divergence. This means the stock price is rising faster than underlying momentum.
Lloyds shares are also trading well above their long term averages. They sit far above both the 50 week and 100 week moving averages. This often leads to a period where prices drift back toward more normal levels.
Because of this, some analysts believe the stock could pull back in the near term. A possible downside target sits near 90p if selling pressure builds.
