Will Lloyds shares reach £1 soon? Or is 76p more likely?

At the time of writing (1 December), Lloyds Banking Group (LSE:LLOY) shares are changing hands for around 95p. This means they’re just 5.3% away from reaching the psychologically important barrier of Â£1.

Will they get there? Or could they go in the opposite direction? Letâs review the evidence.

The bearish view

Based on the forward (2025) price-to-earnings (P/E) ratios of the FTSE 100âs five banks, Lloydsâ shares are the most expensive. If they were rated in line with the average, they would be around 25% cheaper, at 76p.

^{Source: London Stock Exchange Group/company reports}

Looking at the balance sheets of the five, Lloyds is the second most expensive. It has a price-to-book (PTB) ratio of 1.17. According to McKinsey & Companyâs latest research on the global banking industry, the average PTB for the sector is one. In other words, banks are generally valued in line with their net asset value.

This might sound reasonable but many industries attract far higher valuations. McKinseyâs report cautions that investors appear to be questioning the âsustainability of bankâs recent highsâ. It blames âdeclining interest rates [and] shifts in technology and consumer behaviourâ. The management consultancy also notes that fintechs, private credit firms, and wealth managers are gaining customers from more traditional financial institutions.

So Lloyds might not be able to command a stock market valuation significantly higher than its accounting value.

Also, its near-total reliance on the UK economy for its income could be an Achilles’ heel. Last weekâs Budget saw growth forecasts for 2026 and beyond downgraded.

The bullish view

If the analysts are correct, the bankâs recent share price rally isnât over yet. They have an average 12-month share price target of 99.5p. Okay, that’s short of the magic three figures but itâs close enough. The most optimistic forecast suggests 110p is a fair price.

This rosy picture is underpinned by an expectation that, compared to 2024, earnings per share will have grown 79% by 2027.

And the stockâs good for income too. Based on the past 12 months, it’s yielding 3.8%. Although itâs currently not the highest of the five, brokers are expecting its dividend to increase by 51% over the next three years. This gives it a forward yield of 5.1%.

My view

On reflection, Iâm leaning more towards the bearish arguments. I already think Lloyds shares are on the expensive side so I reckon the scope for further growth’s limited. Thatâs why the stockâs not for me.

Having said that, I wouldnât be surprised if the shares did reach 100p before the end of 2025. But for them to go much higher, I suspect something fairly significant has to happen. However, the only major events I can see occurring are negative ones, centring on the UK economy, which appears fragile.

Despite my concerns, I donât think the shares will fall as low as 76p. The bank remains popular with smaller investors â it has more shareholders than any other company in the country â and its earnings are growing. This should help support its share price.

And even though I have concerns about Lloydsâ valuation, I still think itâs a well-run quality company. I just think the FTSE 100âs other banks look a bit cheaper at the moment.

The post Will Lloyds shares reach Â£1 soon? Or is 76p more likely? appeared first on The Motley Fool UK.

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HSBC Holdings is an advertising partner of Motley Fool Money. James Beard has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, Lloyds Banking Group Plc, London Stock Exchange Group Plc, and Standard Chartered 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.