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If you are wondering whether Lloyds Banking Group stock still offers value after a strong run, the next sections break down what the current share price might be implying about the company.
The stock last closed at £1.09, with returns of 3.9% over 7 days, 7.1% over 30 days, 10.0% year to date and 48.3% over 1 year, alongside gains of 190.4% over 3 years and 197.1% over 5 years.
Recent attention on Lloyds Banking Group has centred on how its position as a major UK bank fits into investors’ broader views on interest rates and the domestic economy. These themes often influence how investors assess banks’ earnings resilience, capital strength and the premiums or discounts they are prepared to pay.
On Simply Wall St’s valuation checks, Lloyds Banking Group currently scores 2 out of 6. The next part of this article will walk through traditional valuation approaches, then finish with a more holistic way to think about what that score really means for you.
Lloyds Banking Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Lloyds Banking Group Excess Returns Analysis
The Excess Returns model looks at how much profit Lloyds Banking Group generates on its equity above the return that shareholders require, then capitalises that surplus to estimate what the shares might be worth.
For Lloyds Banking Group, the key inputs are a Book Value of £0.82 per share and a Stable EPS of £0.13 per share, based on weighted future Return on Equity estimates from 16 analysts. The Average Return on Equity is 15.38%, while the Cost of Equity is £0.07 per share. That gap produces an estimated Excess Return of £0.06 per share.
The model also uses a Stable Book Value of £0.84 per share, drawn from weighted future book value estimates from 10 analysts. Putting these elements together, the Excess Returns approach produces an estimated intrinsic value of about £2.01 per share.
Compared with the recent share price of £1.09, this implies the stock is 45.6% undervalued according to this framework.
Result: UNDERVALUED
Our Excess Returns analysis suggests Lloyds Banking Group is undervalued by 45.6%. Track this in your watchlist or portfolio, or discover 7 more high quality undervalued stocks.
LLOY Discounted Cash Flow as at Jun 2026
Approach 2: Lloyds Banking Group Price vs Earnings
For profitable companies like Lloyds Banking Group, the P/E ratio is a useful way to relate what you pay for the stock to the earnings it currently generates. It gives a quick sense of how many years of current earnings the market is pricing in.
What counts as a normal or fair P/E often reflects two things: how quickly earnings are expected to grow and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually supports a lower multiple.
Lloyds Banking Group currently trades on a P/E of 13.76x, compared with the Banks industry average of 11.52x and a peer group average of 11.89x. Simply Wall St’s Fair Ratio for Lloyds Banking Group is 9.92x, which is a proprietary estimate of the P/E investors might typically pay given the company’s earnings growth profile, industry, profit margins, market cap and risk factors. This Fair Ratio can be more informative than simple peer or industry comparisons because it attempts to adjust for those company specific characteristics.
Since the current P/E of 13.76x is above the Fair Ratio of 9.92x, the multiple suggests Lloyds Banking Group stock may be trading on the expensive side.
Result: OVERVALUED
LSE:LLOY P/E Ratio as at Jun 2026
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Upgrade Your Decision Making: Choose your Lloyds Banking Group Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so think of Narratives as your way of giving Lloyds Banking Group a clear story that links what you believe about its future to a set of numbers and a fair value that can be compared to today’s price.
On Simply Wall St’s Community page, Narratives let you connect your view of Lloyds Banking Group, such as how meaningful its AI investment or UK focus might be, to explicit assumptions for future revenue, earnings, margins and the P/E you think is reasonable. The platform can then translate that story into a Fair Value that updates automatically when fresh news or results arrive.
For example, one investor might lean toward the more optimistic narrative, with a fair value of £1.30 per share that assumes faster growth and higher margins. Another might prefer the more cautious narrative closer to £0.79 per share. By setting up these different Narratives side by side and comparing each Fair Value to the current price, you can decide which story you find more credible and whether that points to Lloyds Banking Group stock looking expensive or offering potential value for your own portfolio rules.
For Lloyds Banking Group however we’ll make it really easy for you with previews of two leading Lloyds Banking Group Narratives:
🐂 Lloyds Banking Group Bull Case
Fair value in this bullish narrative: £1.16 per share
Implied discount to this fair value versus the last close of £1.09: about 5.9%
Revenue growth assumption used in this narrative: 8.97%
Focuses on Lloyds Banking Group using digital transformation and AI adoption to reduce costs, support margin expansion and improve earnings quality.
Builds on expectations for recurring fee based revenue from wealth, insurance and retirement products, supported by demographic shifts and regulatory reforms.
Relies on analyst assumptions for rising earnings, higher profit margins and an 11.2x P/E by 2029 to support a fair value close to the current analyst consensus target.
🐻 Lloyds Banking Group Bear Case
Fair value in this bearish narrative: £0.79 per share
Implied premium to this fair value versus the last close of £1.09: about 27.9%
Revenue growth assumption used in this narrative: 9.24%
Highlights Lloyds Banking Group’s reliance on UK retail banking and mortgages, with concerns about property market weakness, loan growth and asset quality.
Flags rising technology, regulatory and compliance costs, together with legacy IT issues, as ongoing pressures on margins and earnings.
Applies a lower assumed future P/E of 8.1x and a fair value of £0.79 to reflect a more cautious view on how these risks might affect long term returns.
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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