Lloyds Share Price Near £1 After BoE Stress Test – Will 2026 Bring More Gains or a Drop Back to 76p?

Published: 3 December 2025

Lloyds Banking Group’s share price is finishing 2025 on a knife‑edge between euphoria and anxiety. On 3 December, the stock pushed to a fresh 52‑week high just below £1 after sailing through the Bank of England’s latest stress test and receiving a price‑target upgrade from JPMorgan. TS2 Tech+1

At the same time, a wave of commentary – including pieces titled “3 reasons why Lloyds’ share price could sink without trace in 2026” and “Will Lloyds shares reach £1 soon? Or is 76p more likely?” – underlines growing concern that the 2025 rally may have run too far. ^[1]

Here’s what today’s news means for investors watching the LLOY share price and trying to decide whether £1 is the start of a new era – or the top of the cycle.

Lloyds share price today: a near‑record high

Real‑time data from Lloyds’ own markets page shows the group’s London‑listed shares trading around 97p on the morning of 3 December 2025, with bid–offer quotes of roughly 96.96p–97.00p. ^[2]

An afternoon update from TechStock² reports intraday highs just under 98p and a closing level near 96.7p, placing the stock at the very top of a 52‑week range of roughly 52p–98p and giving a market capitalisation just under £57bn. TS2 Tech

MarketBeat adds that Lloyds set a new one‑year high today after JPMorgan raised its price target from 100p to 102p, with the shares touching 97.74p on heavy volume and last trading around 97.2p. The stock carries a consensus “Moderate Buy” rating and an average target price of about 98.5p. ^[3]

Depending on the data source and start date, Lloyds is up somewhere between roughly 60% and almost 90% so far this year – one of the standout performances in the FTSE 100. StocksGuide estimates a year‑to‑date gain of about 86.7%, while other commentators quote a rise of around 59% to the high‑80s pence in recent months. ^[4]

For investors who bought when the shares were languishing around 50p in late 2024, LLOY has gone from “perennial value trap” to star performer in less than twelve months.

Stress test success: why the BoE’s verdict matters

The immediate catalyst behind this week’s move is the Bank of England’s 2025 Bank Capital Stress Test (BCST).

In an RNS released on 2 December, Lloyds confirmed that it “comfortably” passed the exercise and is not required to take any capital actions such as cutting dividends or raising fresh equity. ^[5]

Key numbers from the BoE scenario:

Stressed CET1 ratio: 10.9% after management actions, versus a regulatory minimum of 5.9%
Stressed leverage ratio: 4.6% versus a minimum of 3.3%
Starting point (31 Dec 2024): pro‑forma CET1 of 13.5% and U.K. leverage ratio of 5.5% ^[6]

The scenario itself is harsher than the global financial crisis, combining a severe global supply shock, deep recessions, sharp falls in property prices and a spike in unemployment. ^[7]

For shareholders, this result does three important things:

Validates Lloyds’ capital strength. Even after a sizeable provision for the motor‑finance scandal, the group remains well above minimum capital thresholds in a severe downturn. ^[8]
Supports ongoing payouts. With no requirement to conserve capital, management retains flexibility to keep funding ordinary dividends and share buybacks.
Strengthens the 2026 plan. The bank’s 2026 targets – including a CET1 ratio of around 13% while still generating more than 200bps of capital per year – now look more credible. TS2 Tech+1

No surprise, then, that Lloyds shares rose more than 1.5% on 2 December, changing hands at about 97p on the back of the announcement, before extending gains into today’s session. ^[9]

Earnings, dividends and buybacks: what’s driving the bull case?

Solid 2025 profits so far

Behind the regulatory headlines, Lloyds’ underlying numbers have quietly improved throughout 2025.

According to the group’s Q3 2025 materials, for the first nine months of the year the bank delivered: TS2 Tech

Net income around £13.6bn, up roughly 6% year‑on‑year
Operating costs of about £7.2bn, up 3%
Statutory profit after tax of £3.3bn (after motor‑finance charges)
An asset quality ratio of 0.18%, with full‑year guidance near 0.20%
Return on tangible equity (RoTE) of 11.9%, or about 14.6% excluding the motor‑finance provision

Net interest margin (NIM) – a key driver of bank profits – held near 3.06% in Q3, and management even nudged guidance for 2025 net interest income slightly higher. TS2 Tech

Dividend growth from a stronger base

Lloyds has been steadily rebuilding itself as an income stock. In its half‑year update, the group reported a 5% rise in pre‑tax profit to £3.5bn and 6% growth in net income, and rewarded shareholders with an interim ordinary dividend of 1.22p per share, up 15% on the previous year. ^[10]

Data compiled by StocksGuide shows that for the 2024 financial year Lloyds paid total ordinary dividends of about 3p per share. With the stock trading at roughly 97p at the start of December, that implies a trailing yield of just over 3.2%. ^[11]

Looking ahead, IG’s dividend‑forecast analysis suggests: ^[12]

2025 expected DPS: ~3.43p, previously equating to a yield of around 5.6% when the shares were much lower
2026 expected DPS: ~4.01p, a further 17% increase and a notional yield of about 6.5% on older prices

At today’s near‑£1 share price, those forecasts translate into forward yields of roughly 3.5% for 2025 and just over 4% for 2026 – still attractive in a falling‑rate environment, but no longer bargain‑basement.

A separate Yahoo Finance analysis, drawing on broker data, points to similar numbers, projecting 2025 dividends of roughly 3.6p per share, about 13% higher year‑on‑year and implying a forward yield in the mid‑single digits based on earlier share prices. ^[13]

Capital returns and digital strategy

Beyond cash payouts, Lloyds continues to use surplus capital for share buybacks, slowly shrinking a share count of almost 59bn shares. TS2 Tech

Management’s 2026 plan – built around the slogan “Helping Britain Prosper” – targets: TS2 Tech

RoTE above 15%
A cost‑income ratio below 50%
Capital generation above 200 basis points per year
A CET1 ratio run down to around 13% while maintaining a “progressive and sustainable” dividend

To get there, Lloyds is leaning hard into digital and AI‑driven banking. It has been recognised by Euromoney for digital leadership, is preparing to roll out a large‑scale AI financial assistant inside its app for more than 20m customers, and has invested in AI firms such as UnlikelyAI and partners behind its in‑house “FinLLM” model. TS2 Tech

If this strategy boosts fee income and cuts branch‑based costs as planned, it could help offset the profit squeeze from lower interest rates in the coming years.

The bear case: 2026 risks that could derail Lloyds’ rally

The flip side of today’s optimism is a growing chorus of warnings that Lloyds might now be priced for perfection.

1. Interest‑rate cuts and margin compression

Since mid‑2024 the Bank of England has delivered a series of rate cuts, with the base rate reduced to 4% in August 2025 after a narrow 5–4 vote, and subsequently held there in November. ^[14]

With inflation easing and the OECD projecting further UK rate reductions towards around 3.5% by mid‑2026, markets expect the cutting cycle to continue, albeit gradually. ^[15]

That’s good news for borrowers and credit quality – but less helpful for a bank whose profitability is highly sensitive to the gap between what it earns on loans and what it pays on deposits. IG explicitly highlights the Bank of England’s rate path as one of the main factors that will determine Lloyds’ future dividend capacity. ^[16]

A November article syndicated via Yahoo and Motley Fool goes further, naming falling interest rates as the first of “three reasons why Lloyds’ share price could sink without trace in 2026.” ^[17]

2. Motor‑finance redress: a slow‑burn overhang

The UK motor‑finance mis‑selling scandal remains the biggest single known risk in Lloyds’ story.

The FCA’s consultation on an industry‑wide redress scheme (CP25/27) suggests potential total costs for lenders of around £11bn, covering roughly 14.2m car‑finance agreements written between 2007 and 2024 that used controversial commission models. ^[18]

On 3 December, the FCA confirmed that the current pause on handling motor‑finance complaints will be lifted on 31 May 2026, two months earlier than originally planned, signalling that the scheme design is nearing completion. ^[19]

Lloyds, via its Black Horse motor‑finance arm, is widely seen as one of the most exposed banks. The group has already taken motor‑finance provisions approaching £1.95bn, after a major top‑up of £800m earlier this year. TS2 Tech+1

While management believes current reserves should be adequate in most scenarios, independent analysts warn that a generous final scheme or high customer take‑up could push the bill “several billion” higher, forcing further charges, slowing buybacks and weighing on capital ratios. TS2 Tech+1

3. Domestic concentration and rising impairments

Unlike some of its FTSE 100 peers, Lloyds is overwhelmingly focused on the UK retail and commercial market. That gives it a clean, simple story – but also leaves it heavily exposed to the British economic cycle.

A 3 December analysis from SSBCrack News warns that Lloyds’ reliance on domestic earnings could become a serious weakness if the UK economy slows more sharply than expected. Citing projections from Standard & Poor’s, the article notes that Lloyds’ bad‑loan charges could rise from £430m in 2024 to about £1.14bn in 2025, with further increases possible in 2026 as higher‑for‑longer borrowing costs squeeze households. ^[20]

Mortgage, car‑loan and credit‑card books are all particularly sensitive to unemployment and wage growth. If consumer stress rises faster than current models assume, the very low 0.2% impairment ratios that helped 2025 profits could prove unsustainably benign. TS2 Tech+1

4. Valuation: from deep value to premium pricing

Even bullish commentators acknowledge that Lloyds is no longer the deep‑discount bank it once was.

StocksGuide puts the shares on a trailing P/E of around 12.2 and a price‑to‑sales ratio near 1.7, with forward P/E estimates in the low‑teens. ^[21]
TechStock² estimates that the stock now trades on roughly 1.1–1.2 times book value, broadly in line with its long‑term average and only modestly below some peers. TS2 Tech
SSBCrack calculates a current P/B of about 1.2, a marked premium to Lloyds’ 10‑year average around 0.8. ^[22]
MarketBeat’s data shows a higher headline P/E of roughly 17, though this depends on which earnings measure is used. ^[23]

After an 80‑plus‑per‑cent run, consensus 12‑month price targets clustered in the mid‑90s pence suggest that many analysts now see Lloyds as fairly valued or slightly rich, with expected returns increasingly driven by dividends rather than further multiple expansion. ^[24]

That’s why articles like “3 reasons why Lloyds’ share price could sink without trace in 2026” and today’s SSBCrack piece about a potential share price correction argue that a pull‑back may be overdue if the macro turns against UK‑focused lenders. ^[25]

£1 vs 76p: what today’s news changes – and what it doesn’t

Motley Fool’s question – “Will Lloyds shares reach £1 soon? Or is 76p more likely?” – captures the debate neatly. ^[26]

Scenario 1: Soft landing, steady income – £1 becomes a trading range

In a “base case” where:

the motor‑finance scheme lands close to current provisions,
UK interest rates drift down slowly rather than collapsing, and
the housing market stabilises instead of slumping,

Lloyds’ latest stress‑test win and strong capital position make a compelling argument that the business can keep generating high‑single‑digit to low‑double‑digit returns on equity while paying a dividend that edges up from the mid‑3% to low‑4% yield range at today’s price. ^[27]

In that world, it’s easy to imagine the shares oscillating in a broad 90p–105p band, with total returns dominated by dividends and modest earnings growth.

Scenario 2: Hard landing, redress shock – a slide back toward 76p

The more bearish 76p scenario requires several things to go wrong at once:

The FCA’s final motor‑finance scheme proves more generous than expected, forcing Lloyds to take significantly larger provisions than the current £1.95bn. TS2 Tech+2Reuters+2
UK growth disappoints and unemployment rises, driving impairments closer to the £1bn‑plus levels flagged by Standard & Poor’s and raising doubts about 2026 profitability targets. ^[28]
The Bank of England cuts rates more aggressively than markets currently price, compressing net interest margins faster than Lloyds can offset via fees and cost‑cutting. ^[29]
Investor sentiment swings from “recovery story” back to caution, dragging the P/B multiple down towards its long‑run average around 0.8. ^[30]

Put together, that combination could plausibly see the share price retrace to the mid‑70s – roughly where some retail commentators anchor their 76p downside. It would still leave long‑term holders in profit, but would feel painful after 2025’s surge.

Scenario 3: Clean exit from scandals, UK resilience – £1 as a new floor

There is also an upside case. If:

final motor‑finance costs land comfortably within Lloyds’ existing provisions,
the UK economy achieves a soft landing with modest growth in 2026, and
Lloyds delivers on its 2026 targets of RoTE above 15% and a cost‑income ratio below 50%, TS2 Tech+1

then today’s BoE stress‑test result could mark the point at which the market finally treats Lloyds as a structurally more profitable, digital‑first retail bank rather than a perennial restructuring project.

In that environment, analyst targets at or above 100p – such as Royal Bank of Canada’s 110p “outperform” target – no longer look heroic, especially if the group keeps buying back stock and growing its dividend in line with the IG and Yahoo forecast ranges. ^[31]

So, what should investors take away from 3 December 2025?

Today’s news – a clean pass in the Bank of England’s stress test, a fresh 52‑week high, and an analyst upgrade – clearly strengthens the bull case for Lloyds. It confirms that the bank’s balance sheet can withstand a severe downturn and that capital returns to shareholders are unlikely to be derailed by regulatory capital concerns alone. ^[32]

However, it does not remove the main uncertainties that will drive performance into 2026:

the final cost and structure of the FCA’s motor‑finance redress scheme,
the depth and pace of UK interest‑rate cuts,
the trajectory of loan impairments in a still‑fragile domestic economy, and
whether Lloyds can execute its digital strategy without incurring reputational or political backlash. ^[33]

For now, Lloyds looks less like a distressed turnaround and more like a mature income stock with mid‑single‑digit dividend yields and moderate growth, trading near what many analysts see as fair value. From this starting point, future returns will depend less on multiple re‑rating and more on whether 2026 turns out closer to the benign “soft‑landing” script – or the harsher scenario laid out by its critics.