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Highlights

  • Analysts from Jefferies maintain a BUY rating on Lloyds Banking Group with a price target of GBp 92, reflecting a 21.76% upside.

  • Lloyds targets >15% RoTE and >200bps capital generation by 2026, showcasing strategic confidence.

  • FY2024 profit before tax declined 20%, yet the Group maintains strong capital and return guidance.

Lloyds Banking Group Plc (LSE:LLOY) is gaining renewed investor interest as analysts maintain a bullish outlook, with multiple BUY recommendations pointing to a potential upside of over 21% from current levels. Jefferies analyst Jonathan R. Pierce has issued a price target of GBp 92, implying a 21.76% gain from the current trading price of GBp 75.74. 

FY2024 Financials Reflect Margin Pressures

Lloyds reported profit before tax of £5,971 million in FY2024, marking a 20% decline from the prior year’s £7,518 million. The drop was primarily driven by a combination of lower total income, higher operating expenses, and increased impairment charges. Profit after tax stood at £4,477 million, down from £5,518 million in FY2023, and earnings per share dropped to 6.3 pence from 7.6 pence.

Total income for the year came in at £18,003 million, 3% lower year-on-year. Net interest income, a key revenue driver, fell by 8% to £12,277 million, impacted by margin compression, particularly in the mortgage segment. This was attributed to deposit churn and the refinancing of the mortgage book at lower rates. However, the Group partially offset these challenges through higher structural hedge earnings in a high-rate environment.

The Group's underlying profit for the year dropped 19% to £6,343 million, compared to £7,809 million in FY2023. The decline accelerated in Q4, where profit slipped 46% quarter-on-quarter to £993 million, due to seasonal cost increases and one-off charges, including provisions linked to motor finance arrangements.

Strategic Roadmap Reinforces Confidence Through 2026

Despite a tough operating year, Lloyds remains optimistic about its future, reaffirming guidance for 2025 and 2026. For 2025, the Group expects net interest income of approximately £13.5 billion, operating costs around £9.7 billion, and return on tangible equity (RoTE) of 13.5%. Capital generation is forecasted at 175bps.

Looking ahead to 2026, the Group has outlined ambitious yet credible goals, including a cost-to-income ratio below 50%, RoTE above 15%, and capital generation over 200bps. Additionally, Lloyds aims to reduce its CET1 ratio to approximately 13%, signalling disciplined capital management.

The Company also delivered notable progress in 2024, including £0.8 billion in additional revenues from strategic initiatives, £1.2 billion in gross cost savings, and RoTE of 12.3% (14.0% excluding motor finance provision). Capital generation reached 148bps, further highlighting its resilient financial profile.