SKN | Lloyds Share Price Surges Ahead of Earnings as Valuation and Technical Signals Diverge

Key Points

• Lloyds shares are up roughly 75% from April 2025 lows, trading above the key 100p level.

• Q4 earnings are expected to show stronger net interest income and improved cost efficiency.

• Higher-for-longer UK rates continue to support profitability and dividends.

• Technical indicators suggest near-term pullback risk despite strong fundamentals.

Lloyds Banking Group shares have extended a powerful rally into earnings week, climbing to around 101.65p and marking their highest levels since 2008. The move reflects optimism driven by resilient global bank earnings and expectations that Lloyds will deliver a solid fourth quarter as the UK economy stabilizes.

However, with the stock now deeply extended, investors are weighing improving fundamentals against rising technical exhaustion.

Earnings Preview: What the Market Is Expecting

Lloyds is set to publish its fourth-quarter and full-year results this week, with consensus estimates pointing to a constructive end to the year. Analysts expect net interest income of approximately £3.54 billion in Q4, up from £3.45 billion in the previous quarter, supported by elevated interest rates and stable lending conditions.

Other income, including wealth management fees, service charges, and property-related income, is forecast to rise to about £1.55 billion. If met, full-year net interest income would reach roughly £13.65 billion, up from £12.84 billion a year earlier, while other income is projected at £6.08 billion versus £5.5 billion previously.

Quarterly profit is expected to come in near £1.2 billion, taking full-year profit to around £4.57 billion.

Rates, Costs, and Shareholder Returns

Like many UK and European banks, Lloyds has benefited from a higher-rate environment. With UK inflation still well above the Bank of England’s 2% target—headline CPI stood at 3.4% in December—markets increasingly expect rates to remain restrictive for longer, underpinning net interest margins.

Cost discipline is also a key theme. Analysts estimate the cost-to-income ratio fell to about 59.6% in Q4 from 68.4% previously, with expectations for continued improvement toward the high-40% range by FY28 as digital adoption accelerates.

Shareholder returns remain a growing attraction. Consensus forecasts point to dividends rising from 3.17p in 2024 to 5.77p by 2028, while share buybacks could increase from £1.7 billion in 2024 to around £3 billion by 2027.

Remediation Costs Begin to Ease

Another important catalyst is the outlook for remediation costs linked to motor finance and insurance-related issues. These costs are expected to peak around £1 billion in 2025 before declining sharply toward roughly £248 million by 2028, reducing a long-standing drag on profitability.

Technical Picture: Rally Meets Resistance

From a technical perspective, Lloyds shares are firmly in an uptrend, trading within an ascending channel and hovering near its upper boundary. The stock has decisively cleared the psychological 100p level, reinforcing bullish momentum.

That said, momentum indicators are flashing caution. The Percentage Price Oscillator has formed a bearish crossover, while the Relative Strength Index has started to turn lower—signals that upside momentum may be fading in the short term.

Buy or Sell?

Fundamentally, Lloyds enters earnings with supportive macro conditions, improving efficiency, and an attractive capital return profile. These factors argue for medium-term resilience.

In the near term, however, the technical setup suggests a risk of profit-taking after results. A pullback toward the 95p area—the lower end of the ascending channel—would not be unusual after such a steep rally and could offer a more attractive re-entry point for longer-term investors.

For a confidential discussion on how UK bank exposure, earnings-cycle positioning, and dividend-led strategies can be assessed within a broader portfolio allocation, contact our senior advisory team.