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If you are wondering whether Lloyds Banking Group at around £0.97 a share still offers value, the key is to look past the headline price and focus on what different valuation tools are really saying.
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The stock has seen mixed recent returns, with a 3.2% decline over 7 days, a 6.3% gain over 30 days, a 2.2% decline year to date, and a 37.8% return over the last year, alongside very large gains over 3 and 5 years that may influence how you think about risk and reward today.
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Recent coverage has centered on how investors are reassessing large UK banks, with Lloyds often highlighted in discussions around interest rate expectations, mortgage exposure, and the health of UK consumers. These themes give important context for reading the share price path and form a backdrop for judging whether today's level feels stretched or conservative.
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Simply Wall St currently gives Lloyds Banking Group a valuation score of 2 out of 6, so the rest of this article will walk through the main valuation approaches behind that score and then finish with a way to look at value that goes beyond any single model.
Lloyds Banking Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown .
Approach 1: Lloyds Banking Group Excess Returns Analysis
The Excess Returns model looks at how efficiently Lloyds Banking Group turns shareholder capital into profits, then compares those returns with the cost of that capital. If the bank consistently earns more than its cost of equity, the model assigns extra value to the shares.
For Lloyds, the starting book value is £0.71 per share, with a stable book value estimate of £0.83 per share based on forecasts from 7 analysts. The stable earnings per share figure is £0.12, sourced from weighted future Return on Equity estimates from 12 analysts. The average Return on Equity is 14.75%, while the cost of equity is £0.07 per share, leaving an excess return of £0.05 per share.
Simply Wall St converts these excess returns into an intrinsic value per share, which comes out at about £1.87. At a current share price around £0.97, this Excess Returns valuation implies the stock is 48.2% undervalued on these assumptions.
Result: UNDERVALUED
Our Excess Returns analysis suggests Lloyds Banking Group is undervalued by 48.2%. Track this in your watchlist or portfolio , or discover 9 more high quality undervalued stocks .
Approach 2: Lloyds Banking Group Price vs Earnings
For a profitable bank like Lloyds Banking Group, the P/E ratio is a straightforward way to think about value because it links what you pay per share to the earnings backing that share. In simple terms, higher expected growth and lower perceived risk can justify a higher P/E, while lower growth expectations or higher risk tend to pull a "normal" or "fair" P/E down.
Lloyds currently trades on a P/E of 13.52x. That sits above both the wider Banks industry average P/E of 10.92x and a peer group average of 10.98x, so on a plain comparison the shares look more expensive than many listed banks.
Simply Wall St's Fair Ratio for Lloyds is 9.22x. This is its view of what a reasonable P/E might be given factors such as earnings growth, profit margins, the bank's size, its industry and identified risks. This Fair Ratio can be more informative than a simple peer or industry check because it adjusts for Lloyds specific profile rather than assuming all banks deserve similar multiples. Set against the current 13.52x P/E, the Fair Ratio points to Lloyds trading at a richer level than this model would imply.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 5 top founder-led companies .
Upgrade Your Decision Making: Choose your Lloyds Banking Group Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St give you a simple way to write your story about Lloyds Banking Group, link that story to assumptions for future revenue, earnings and margins, and then turn it into a Fair Value that you can compare with the current price on the Community page. The system updates your view as new news or results arrive. This means one investor might build a bullish Lloyds Narrative around a £1.30 fair value using assumptions similar to the higher analyst targets, while another might lean closer to £0.53 using more cautious assumptions. Both can clearly see how their different stories lead to different numbers.
For Lloyds Banking Group, here are previews of two leading Lloyds Banking Group narratives:
🐂 Lloyds Banking Group Bull Case
Fair value used in this bullish narrative: £1.13 per share.
Implied valuation gap vs last close of £0.97: about 14% below this fair value.
Revenue growth assumption: 9.42% a year.
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Analysts in this camp see digital transformation, AI use and cost control supporting higher margins and earnings quality over time.
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They lean on growth in wealth, insurance and other fee based businesses to lift recurring revenue and reduce reliance on traditional lending.
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The buyback and dividend policy, alongside capital generation, are treated as important supports for total shareholder return if these assumptions hold.
🐻 Lloyds Banking Group Bear Case
Fair value used in this bearish narrative: £0.77 per share.
Implied valuation gap vs last close of £0.97: about 26% above this fair value.
Revenue growth assumption: 9.49% a year.
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This view focuses on Lloyds heavy tilt to UK retail and mortgages, which could leave earnings exposed if the domestic backdrop weakens.
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Rising technology, compliance and regulatory costs are treated as a drag on future margins, even with ongoing efficiency efforts.
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Even with buybacks and dividend uplift, this group of analysts sees the current P/E as too rich if loan growth, spreads and returns end up closer to their assumptions.
Both narratives are built from the same pool of forecasts and disclosures. However, they weight the risks and opportunities very differently, which is why the fair values span from around £0.77 to £1.13.
If you want to stress test your own view of Lloyds against these kinds of bullish and bearish cases, it can help to see how other companies with solid fundamentals are being priced right now through a focused screener such as the solid balance sheet and fundamentals stocks screener (18 results) .
Do you think there's more to the story for Lloyds Banking Group? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include LLOY.L .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
