The Lloyds (LSE:LLOY) share price has jumped 42% in 2025. And it now trades at multiples which were hard to imagine during the Silicon Valley Bank fiasco and the Credit Suisse collapse.
However, the shares still trade far below where they could be if they enjoyed the valuation typical of US banks. Based on 2025 projections, Lloyds should deliver statutory earnings per share of 6.68p. Its current share price is sitting at 78.05p.
This puts the company’s prospective price-to-earnings (P/E) multiple at 11.4 times. That’s a material discount to the present US banking sector average of 14.6 times earnings. It’s worth mentioning that even across the Atlantic, the US banking sector’s P/E ratio is trading above its own recent history, with a three-year average closer to 11.6 times.
The same pattern emerges on other metrics. For 2025, Lloyds’s price-to-sales ratio is 2.35 times, notably below the US average at 3 times. This persistent gap stems from the reality that US banks are often more diversified, more profitable, and more easily attract higher investor demand, reflecting a deeper, more liquid market and greater perceived resilience.
As such, If Lloyds were to trade on the same P/E multiple as US banks, its share price would look very different. At a 14.6 times multiple, those forecast earnings of 6.68p would imply a fair price of 97.5p.
In other words, if Lloyds enjoyed the valuation premium of its American peers, its shares would be trading at a level roughly 25% higher than today. This stark difference highlights just how much UK banks have been left behind in the market’s risk and reward calculus.
Lloyds still has a lot to offer
Looking beyond where Lloyds trades today, its growth profile looks increasingly attractive. Based on consensus forecasts from the company’s latest data, earnings per share should rise substantially in the years ahead, reaching 9.11p in 2026 and 11p in 2027.
At the same time, Lloyds is expected to continue increasing its dividends. Forecasts point to an increase from 3.43p in 2025 to 4.12p in 2026 and 4.7p in 2027. The corresponding dividend yield, based on current prices, climbs from 4.5% in 2025 to an impressive 6.15% by 2027. The payout ratio is expected to steadily improve as Lloyds’s earnings expand.
However, all considered, I’d suggest it’s trading in line with UK peers.
The bottom line
Several factors are likely to support these earnings improvements. As the group unwinds its structural hedge, Lloyds should be able to capture higher yields on its assets, which, when combined with its consistent cost discipline, should feed through to bigger shareholder returns. Earnings should also improve as money set aside for impairment charges appears to be geared toward the near term.
Even so, the bank’s singular focus on the UK market remains a risk. If domestic conditions deteriorate or the consumer comes under pressure, Lloyds’s forecasts could quickly come under strain.
However, despite my concerns about the country’s economic leaders, I think Lloyds should continue to perform well in the medium term. It’s a core part of my portfolio, and I believe it deserves broader consideration.
