In 2025, the Lloyds Banking Group (LSE:LLOY) share price soared 79% and shareholders enjoyed some healthy dividends too. But what’s in store for 2026? Fortunately, analysts are employed to crunch the numbers and give investors useful insights. I’ve been looking at their predictions to see what they think.
What do they say?
Ahead of the publication of its 2025 results on 29 January, City professionals updated their forecasts. And as the table below illustrates, they show a small improvement in the earnings per share (EPS) estimates produced just before Lloyds released its Q3 numbers. By 2027, analysts are now expecting an 81% increase compared to 2024.
| Financial year | Latest EPS forecast (pence) | Previous EPS forecast (pence) |
|---|---|---|
| 2024 | 6.3 (actual) | 6.3 (actual) |
| 2025 | 6.7 | 6.6 |
| 2026 | 9.6 | 9.5 |
| 2027 | 11.4 | 11.3 |
Some of the hike’s due to anticipated share buybacks. Even so, post-tax earnings are predicted to rise by 56%.
And it’s a similar story for the bank’s dividend. Over the same period, analysts are forecasting — again — a 56% increase.
| Financial year | Latest dividend forecast (pence) | Previous dividend forecast (pence) |
|---|---|---|
| 2024 | 3.17 (actual) | 3.17 (actual) |
| 2025 | 3.63 | 3.60 |
| 2026 | 4.23 | 4.10 |
| 2027 | 4.94 | 4.80 |
However, this optimism appears to have already been factored in to Lloyds’ current (23 January) stock market valuation. Analysts’ average 12-month price target has been hovering around the £1 mark for a while now, which is roughly where the bank’s share price sits at the moment.
What does this mean?
Assuming the ‘experts’ are right, it suggests a £10,000 investment made today will show no capital growth between now and the end of the year. However, dividends of £423 could be earned. This would imply an overall return of 4.2%.
By comparison, £10,000 of shares bought at the start of 2025 would now be valued at £18,612. And the 18,255 shares could earn a dividend of £772 in respect of the bank’s 2026 financial year.
It therefore looks to me as though investors have missed the boat on this one, certainly in terms of significant capital growth.
However, analysts have also published their 2028 forecasts. The consensus is predicting EPS of 12.8p and a dividend of 5.77p. A forward (2028) price-to-earnings (P/E) ratio of 7.8 suggests the shares still offer good value. And a forward dividend yield of 5.8% looks like a great opportunity too.
Of course, dividends can’t be guaranteed. But the possibility of earning 14.94p a share over the next three years is likely to appeal to income investors. And with the 2028 dividend expected to be covered 2.2 times by earnings, it seems like a reasonably conservative prediction.
Stretching credibility
But these forecasts seem incredibly optimistic to me. Comparing 2028 with 2024, a 5.7 percentage point improvement on the return on tangible equity’s huge. And an increase in the bank’s net interest margin from 2.95% to 3.45% — during a period when interest rates are expected to fall — seems challenging.
Then there’s the cost/income ratio. It’s forecast to fall from 60.4% to 47.2%. I know a lot of the bank’s costs are fixed but, even so, this seems like a bit of a tall order to me.
To be honest, I fear that if the bank falls short of these numbers, even by a small amount, there could be a sharp correction in its share price. That’s why, on balance, the stock’s not for me. Personally, I think there are better opportunities elsewhere in the sector and beyond.
