What next for the Lloyds share price, after a 25% climb in 2024?

I anticipated the Lloyds Banking Group (LSE: LLOY) share worth to achieve some floor after H1 outcomes on Thursday (25 July).

However I used to be disenchanted to see solely a 1.6% rise on the day. And that’s although the outcomes have been higher than anticipated.

Lloyds shares are nonetheless up 25% to this point in 2024, however that’s nothing in comparison with the large 65% surge we’ve seen from NatWest Group.

Interim outcomes

Revenue earlier than tax within the first half fell from final yr. However whereas market analysts had anticipated a revenue earlier than tax of £3.2bn, Lloyds beat it by posting £3.32bn.

Nonetheless, the autumn is partly all the way down to a drop within the financial institution’s web curiosity margin, which fell to 2.94% from 3.18% a yr beforehand.

In accordance with the pundits, we could possibly be taking a look at a 50% likelihood of a base price reduce when the Financial institution of England subsequent meets to debate it, on 1 August.

A drop ought to reduce into the banks’ web curiosity additional. And which may properly be the rationale behind the lacklustre response to those outcomes.

What subsequent?

However what concerning the outlook for Lloyds, and what may it imply for the way forward for the share worth?

On the midway stage, the financial institution confirmed its 2024 steerage, aiming at a return on tangible fairness (ROTE) of about 13%. And it needs to get its CET1 ratio, a key liquidity measure, to round 13.5%.

Then by 2026, the ROTE goal is about at greater than 15%, which might be a strong acquire. However we shouldn’t anticipate to see progress with CET1, set to drop a bit to about 13%.

These could be fairly strong outcomes, not even near suggesting any liquidity issues. And the CET1 goal is means higher than the minimal regulatory necessities.

Valuation

Forecasts have the price-to-earnings (P/E) ratio at 10 for the present yr. The FTSE 100’s long-term common is about 50% greater than that.

With in the present day’s monetary uncertainties although, that is likely to be truthful worth on this yr’s earnings. However forecasts present earnings per share (EPS) rising by 40% between 2023 and 2026, albeit with a dip this yr. The 2026 P/E could be down round 7 in the event that they’re proper.

Within the brief time period, I feel many will see in the present day’s share worth as excessive sufficient for now. And till this yr pans out, and the anticipated revenue fall is behind us, buyers won’t need to put an excessive amount of into Lloyds.

The curiosity margin menace hangs over it too.

The ahead dividend yield dip to 4.6% as a result of worth rise we’ve already seen additionally takes away among the attraction. No less than till we see it rising once more, after the ultimate 2024 fee is out of the best way.

Future

So, I worry a flat second half for Lloyds shares. However the prime finish of brokers’ worth targets suggests round 71p, for a acquire of 18% on in the present day’s worth.

I can see that as a good chance, at the very least in 2025 if maybe not this yr so the inventory could possibly be price contemplating.