Here’s how much £5,000 invested in Lloyds shares two years ago is now worth

It’s just about two years since Lloyds Banking Group (LSE: LLOY) shares finally started on their long-awaited recovery. And since mid-February 2024, patient investors have seen their holdings more than double in value. They’re actually up around 130%, plus dividends, currently forecast to deliver a 3.6% yield in the current year.

That means £5,000 invested in Lloyds’ shares before the two-year climb would now be worth £11,500, not including the dividends.

On 29 January, Lloyds reported a 12% rise in pre-tax profit from an 8% increase in total income for 2025. And the bank also announced a new share buyback programme of up to £1.75bn. That was very impressive. And since then, analysts have started raising their forecasts. But after the cracking two-year share price rise, there surely can’t be any more left. Or can there?

Price targets

Deutsche Bank’s one of the latest to update its guidance, lifting its target from 110p to as high as 125p. That would mean another 19% on top of the share price, at the time of writing. The £11,500 an investor could have today by putting £5,000 into Lloyds’ shares two years ago could grow close to £13,700.

I can see why some shareholders might be a bit nervous after the big share price gains we’ve already seen however. But I’m holding on to mine, for sure.

Speaking of possible investor jitters, I don’t want to dismiss fears. In fact, I can see where Lloyds might be exposed to greater specific risks than the banking sector in general.

Interest margins

Lloyds is focused on UK retail banking, and it doesn’t have the international arm of some of its competitors. It’s the UK’s biggest mortgage provider, so it really is all about domestic lending.

In 2025, Lloyds’ underlying net interest income reached a whopping £13.6bn, up 6% on the 2024 figure. And it was underscored by a healthy 3.06% banking net interest margin. When working out bank stock valuations, that margin’s a key measure. It marks the difference between the interest a bank can earn from lending money, and the interest it pays to creditors.

If the balance is right, it can be like a licence to print money. And when Bank of England (BoE) base rates are high, that balance can be very nice indeed. The problem is, it seems increasingly likely that the BoE will cut its rates perhaps a bit quicker than many expect. UK inflation’s dropped to 3%, not too far above the target 2%.

What next?

Right now, we’re looking at a forecast price-to-earnings (P/E) ratio of 10.5 for Lloyds’ shares for 2026. That’s below the FTSE 100 average. But considering the uncertain economic outlook we still face, I could see it as being about fair value. It might be enough for me to hold, but I’m more likely to direct new investment cash in a different direction.

Saying that, if the forecasts are right, the Lloyds P/E could drop under eight by 2028. And I’d rate that as cheap again.

Hmm, maybe I will consider buying more.

The post Here’s how much £5,000 invested in Lloyds shares two years ago is now worth appeared first on The Motley Fool UK.

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Alan Oscroft 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.

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