3 numbers that Lloyds’ shareholders should keep an eye on
Since the start of 2025, Lloyds Banking Group (LSE:LLOY) shares have risen over 90%. But for how much longer will this impressive run continue? Here are some important financial metrics that I think are likely to have a big influence.
Taking an interest
The net interest margin (NIM) measures the difference between the amount charged on loans and that paid on deposits, expressed as a percentage of interest-earning assets. In a higher interest rate environment thereâs more scope for increasing loan rates. But the opposite could apply if competition intensifies.
In 2025, Lloyds reported a NIM of 3.06%. Although an improvement on the previous year, it was slightly below the figure reported in 2023. But this isn’t surprising given that the Bank of Englandâs base rate was at its post-pandemic high of 5.25% at the end of that year. Itâs now fallen to 3.75%.
| Year | Net interest margin (%) | Base rate at 31 December (%) |
|---|---|---|
| 2016 | 2.71 | 0.25 |
| 2017 | 2.86 | 0.50 |
| 2018 | 2.93 | 0.75 |
| 2019 | 2.88 | 0.75 |
| 2020 | 2.52 | 0.10 |
| 2021 | 2.54 | 0.25 |
| 2022 | 2.94 | 3.50 |
| 2023 | 3.11 | 5.25 |
| 2024 | 2.95 | 4.75 |
| 2025 | 3.06 | 3.75 |
What Iâm struggling to understand is why analysts are forecasting that Lloyds will be able to raise its NIM to 3.45% by 2028, given that the UKâs central bank is widely expected to continue to cut the cost of borrowing. Some experts are forecasting that the base rate will settle at around 2.5% in 2027.
Having said that, when interest rates were close to zero, the bank reported a NIM of 2.52%-2.93%. Maybe Iâm being overly pessimistic? But we live in different times now. Digital banks are threatening to take market share from those with a high street presence.
Impairments
Accounting standards require banks to make a regular assessment of the recoverability of their loans. Based on pre-determined formulae, this results in a movement (up or down) in a provision thatâs included on their balance sheets. If the position worsens, an impairment charge (cost) is included in the income statement, which reduces earnings. An improvement has the opposite effect.
A look back over the past 10 years shows, unsurprisingly, a big problem during the pandemic. Since then, things have stabilised.
| Year | Impairment (charge)/credit (£m) |
|---|---|
| 2016 | (645) |
| 2017 | (795) |
| 2018 | (937) |
| 2019 | (1,291) |
| 2020 | (4,247) |
| 2021 | 1,385 |
| 2022 | (1,510) |
| 2023 | (308) |
| 2024 | (433) |
| 2025 | (795) |
With nearly all of the bankâs business generated from UK-based customers, the quality of its loan book will be affected by the performance of the domestic economy. Although most economists are forecasting relatively modest growth over the next few years, a weakening British economy is likely to be bad news for Lloyds.
Passive income
Finally, I reckon the bankâs dividend will have some impact on its share price. As the table below shows, the stockâs historically offered an above-average yield. This has fallen lately due to the bank’s amazing share price performance.
| Year | Share price (pence) | Dividend per share (pence) | Yield (%) |
|---|---|---|---|
| 2016 | 62.03 | 3.05 | 4.9 |
| 2017 | 68.06 | 3.05 | 4.5 |
| 2018 | 51.85 | 3.21 | 6.2 |
| 2019 | 62.50 | 1.12 | 1.8 |
| 2020 | 36.44 | 0.57 | 1.6 |
| 2021 | 47.80 | 2.00 | 4.2 |
| 2022 | 45.41 | 2.40 | 5.3 |
| 2023 | 47.71 | 2.76 | 5.8 |
| 2024 | 54.78 | 3.17 | 5.8 |
| 2025 | 98.24 | 3.65 | 3.7 |
Analysts are expecting a dividend of 5.77p a share by 2028. This implies a forward yield of 5.5% (at 27 February), which would help restore Lloydsâ status as a share thatâs great for passive income. Of course, there can never be any guarantees.
Too good to be true?
If analystsâ forecasts prove to be accurate, Iâm sure Lloyds’ share price will rise higher still. With earnings per share (EPS) of 12.8p expected in 2028, the stockâs currently trading on a modest 8.1 times forecast earnings.
Personally, I have my doubts that the bank will be able to achieve this. Over the past decade, its highest annual EPS has been 7.5p, in 2021. I reckon there are more attractive opportunities to consider elsewhere.
The post 3 numbers that Lloyds’ shareholders should keep an eye on appeared first on The Motley Fool UK.
Should you invest £1,000 in Lloyds Banking Group plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Lloyds Banking Group plc made the list?
More reading
- I asked ChatGPT if the epic Lloyds share price surge is over and it saidâ¦
- Forget Lloyds shares, this bank’s earnings could treble by 2027!
- How much income could £40k in a Stocks and Shares ISA generate in 2040?
- Here’s why the Lloyds share price may have a turbulent few months
- Did I make a big mistake selling Lloyds shares?
James Beard has no position in any of the shares mentioned. 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.
