Lloyds’ share price beat all FTSE 100 banks in August — but 2 FTSE 250 peers are still ahead
Up 5.17%, the Lloyds share price has done well this month, beating out all the other major UK banks including NatWest, Barclays and HSBC. As Britainâs biggest retail bank, Lloyds is often seen as the bellwether of the sector.
But while itâs led the FTSE 100 pack, two regional FTSE 250 players are actually ahead.
Close Brothers Groupâs (LSE: CBG) jumped 17.73% this month, while Paragon Banking Groupâs (LSE: PAG) up 5.95% (as of 28 August).
That begs the question: do these smaller lenders offer the same long-term value as Lloyds? I decided to take a closer look.
Flying too close to the sun
Close Brothers has been one of the most remarkable performers of 2025, with its share price almost doubling year-to-date. The specialist financial services group provides lending, securities trading and investment management solutions across a range of sectors.
Much of the recent rally came after the Supreme Court overturned previous rulings on car loan sales practices. That decision lifted a cloud hanging over several banks â Lloyds included â and helped spark investor enthusiasm.
But hereâs the catch: despite its soaring share price, Close Brothers is still unprofitable. Its latest results showed it swung to a loss of £102.4m, representing a 172% decline. That raises questions about how sustainable the rally really is.
To be fair, the stock does look cheap on paper, trading on a forward price-to-earnings (P/E) ratio of 8.2 and a price-to-book (P/B) ratio of just 0.47. Yet some analysts believe the good news is already priced in. RBC Capital Markets recently downgraded the stock to Sector Perform, keeping its price target at 525p.
The risk, in my view, is that Close Brothers may struggle to justify the recent surge if profitability doesnât follow.
A reliable income stock
Paragon Banking Group, on the other hand, offers a steadier story. Known for its focus on specialist mortgages, consumer loans, and buy-to-let lending, the bank has built a reputation as a dependable dividend payer. It currently yields 4.6%, backed by a 20-year history of payments and a payout ratio of around 40%.
Valuation looks undemanding too, with a forward P/E ratio of 8.6 and a P/B ratio of 1.2. Importantly, Paragonâs profitable â it boasts a 21.5% operating margin and a return on equity (ROE) of 14.7%. In its Q3 trading update, loan balances rose 4.8%, underlining steady business growth.
Broker sentiment remains cautious but constructive. On 26 August, Jefferies issued a Hold rating with a target of 1,015p, while the broader analyst consensus sits at around 1,000p â implying a potential 12% increase from todayâs price.
My verdict
Despite outperforming Lloyds this month, Close Brothers has still shed 58% of its value over the past five years. This yearâs recovery has rewarded shareholders handsomely, but with little to back a long-term thesis, I wouldnât consider the stock.
Paragon however, looks more attractive. For income investors seeking a reliable and fairly valued opportunity, it seems like a stock worth considering. Lloyds may remain the UK banking heavyweight but, on balance, I think Paragon deserves a place on any watchlist.
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Mark Hartley has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
