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If you are wondering whether Lloyds Banking Group shares still offer value after the recent run, this article will walk through what the current price might be implying.
The stock last closed at £1.02, with returns of a 0.4% decline over 7 days, 4.8% over 30 days, 2.4% year to date and 72.7% over the past year, as well as 126.0% over 3 years and 288.1% over 5 years.
Recent headlines around Lloyds Banking Group have focused on its position as a major UK retail and commercial bank and its exposure to the domestic economy. These themes help frame how investors think about both the upside potential and the risks that might be reflected in the current share price.
Simply Wall St currently gives Lloyds Banking Group a valuation score of 2 out of 6. We will break this down using different methods, then finish with a look at a more complete way to think about value that goes beyond any single model.
Lloyds Banking Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, then capitalises those extra returns into a per share value.
For Lloyds Banking Group, the model starts with a book value of £0.77 per share and a stable book value estimate of £0.80 per share, based on weighted future book value estimates from 9 analysts. On that equity base, analysts see stable EPS of £0.11 per share, sourced from weighted future Return on Equity estimates from 10 analysts, which implies an average Return on Equity of 13.98%.
The required return for shareholders, or cost of equity, is £0.07 per share, so the excess return is put at £0.04 per share. By projecting these excess returns forward and discounting them, the model arrives at an intrinsic value of about £1.63 per share.
Compared with the recent share price of £1.02, the Excess Returns model implies Lloyds Banking Group is around 37.4% undervalued on this basis.
Result: UNDERVALUED
Our Excess Returns analysis suggests Lloyds Banking Group is undervalued by 37.4%. Track this in your watchlist or portfolio, or discover 872 more undervalued stocks based on cash flows.
LLOY Discounted Cash Flow as at Jan 2026
For a profitable bank, the P/E ratio is a straightforward way to see what the market is willing to pay for each pound of earnings. It is especially useful when earnings are a key driver of shareholder returns, as they are for established lenders like Lloyds Banking Group.
Story Continues
What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected earnings growth and lower perceived risk can justify a higher multiple, while slower growth or higher risk usually mean a lower one. Lloyds Banking Group currently trades on a P/E of 17.27x, compared with the Banks industry average of 11.13x and a peer average of 12.63x.
Simply Wall St’s Fair Ratio is a proprietary estimate of what a more tailored P/E might be, given factors such as earnings growth, industry, profit margins, market cap and risk profile. This is more specific than a simple peer or industry comparison because it adjusts for company level characteristics rather than treating all banks as alike. For Lloyds Banking Group, the Fair Ratio is 10.51x, which is noticeably below the current 17.27x. This indicates that the shares trade above this tailored benchmark.
Result: OVERVALUED
LSE:LLOY P/E Ratio as at Jan 2026
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1428 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your story about a company, tied to your own view of fair value and assumptions for future revenue, earnings and margins.
A Narrative connects what you believe about a business, such as Lloyds Banking Group’s role as a UK focused bank, to a financial forecast and then to a fair value per share, so you are not just looking at ratios in isolation.
On Simply Wall St’s Community page, millions of investors can set up these Narratives and compare their Fair Value to the current share price to help decide whether they see the stock as appealing or not at today’s level. They can then see their view refresh automatically when new information like results or news is added.
For example, one Lloyds Banking Group Narrative might assume a relatively conservative outlook that leads to a low fair value estimate, while another might use more optimistic profitability assumptions that lead to a much higher fair value. This shows how different perspectives on the same numbers can lead to very different conclusions about the same share price.
Do you think there’s more to the story for Lloyds Banking Group? Head over to our Community to see what others are saying!
LSE:LLOY 1-Year Stock Price Chart
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include LLOY.L.
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