The Lloyds Banking Group (LSE: LLOY) share price is only a bit above 50p, at the time of writing. So is it reckless to speculate about a rise to near 100p?
Well, this is just a bit of fun, and I’m not actually making any predictions. But if we’re going to be ambitious, we might as well be properly ambitious, right?
So here are three things that I think could send the Lloyds share price towards 100p. Of, perhaps, various degrees of plausibility.
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Investors love banks again
The stock market seems to fall in love with certain stocks or sectors. And it loved the banks in the early 2000’s.
Property was soaring. And, sliced and diced, mortgage-based securities were the new hot thing. The investment banking arms of the big names in the sector saw the profits rolling in.
And we know what happened when the so-called sub-prime mortgage crisis triggered the biggest bank crash in living memory.
Will the market fall back in love with banks to that extent again? Hmm, maybe not.
But what if investors decide Lloyds shares are worth a price-to-earnings (P/E) ratio in line with the FTSE 100 average? That could see the price up close to £1, based just on 2025 forecasts.
Plausible? Maybe not soon, but..?
Earnings and dividend growth
A more down-to-earth suggestion, perhaps, is that Lloyds’ earnings and dividends just keep growing in line with broker forecasts.
We’re looking at a forecast dividend yield of 5.4% for 2024, and a P/E of nine. If the City analysts are right, both those measures should improve over the next few years. That is, if the share price stays the same.
But it’s surely not likely to, is it? I mean, what if we should see earnings per share (EPS) rise 13% by 2026 (from 2023) as forecast?
To keep the P/E the same, we’d need to see the share price rise by 13% too. That would only take it as far as 59p. But even with that rise, the forecast dividend should yield a hefty 6.1%.
And if things are looking that good by then, might that trigger a further share price rise?
Investor confidence
Forecasts still suggest a price well below £1 by 2026 on these assumptions. But it could definitely be heading in the right direction.
We’re also starting to see clear improvements in investor confidence. According to the latest survey of Hargreaves Lansdown customers, confidence has ticked up eight points. Imagine that, investors 8% happier. It sounds a bit like Bhutan, a country with a Gross National Happiness index — no, really.
I admit, it would take a big jump in confidence to nearly double the Lloyds share price.
Direction uncertain
Lloyds still has to make it out of the swamp of interest rate pressure, mortgage pain, bad debt provisions, mis-selling probes… you know, all the obstacles that litter the path for our banks.
But I do think stronger investing confidence, plus some proof of the forecast pudding, could push Lloyds shares up nicely. And might we even get a little bit of that love?
