The Lloyds Banking Group (LSE:LLOY) share price responded positively to 30 July half-year results. The stock closed the day 3.9% higher. But where might it go next? Let’s take a closer look.

What did the results show?

In the world of banking, there are three key financial measures that analysts tend to focus on when assessing results. How did Lloyds fare against these?

The return on tangible equity isn’t only a guide to profitability but also operational efficiency. Prior to publication of the bank’s results for the first six months of 2026, analysts were expecting this to be 16.6%. In fact, it was 17.1%.

The net interest margin (NIM) is usually expressed as a percentage and is calculated by deducting the interest paid on deposits from the amount earned from loans, and then dividing this number by the value of interest-bearing assets. Lloyds reported a NIM of 3.19% compared to the 3.22% expected by analysts. That’s a narrow miss.

But it was still 0.15 percentage points higher than for the same period in 2025. For context, had it met expectations, the bank’s profit before tax would have been £147m (+3.4%) more.

Finally, there’s the common equity tier 1 (CET1) ratio, a measure of financial strength. Predictions were for 13.2% (after share buybacks and dividends). Lloyds fell a little short and reported a CET1 ratio of 13.1%.

More widely, it matched predictions for earnings per share (EPS) and beat the dividend forecast. Net income was also marginally higher. Overall, I think it was a strong set of results.

The trouble is that the UK’s banks, including Lloyds, are doing quite well at the moment. As a result, a number of think tanks and other commentators are calling on the new Prime Minister to introduce a windfall tax or other levy. Indeed, it might prove tempting for an increasingly cash-strapped government.

Also, Lloyds derives virtually all of its income from the UK which means it’s particularly vulnerable to a domestic slowdown.

But what does the City think?

Undervalued?

Analysts have a 12-month share price target for the bank of 125p. Given that EPS was in line with expectations, I suspect most forecasts are going to remain unchanged. However, if the bank’s shares do reach 125p, that would be an 8.7% increase on their current (1 August) value. It means a £5,000 investment could grow to £5,435.

On top of this, the bank’s declared an interim dividend of 1.58p a share. That’s an impressive 29.5% increase on 2025. If the total payout for the year is raised by the same amount, shareholders could earn (no guarantees) 4.73p a share over the next 12 months. This would produce income of £206 on a £5,000 investment made today.

That’s a possible overall return – capital growth and dividends – of 12.8% (£641).

My view

Although this isn’t to be sniffed at, I think there are better opportunities to consider elsewhere. Looking at its share price relative to earnings, it’s the most expensive of the FTSE 100’s five banks.

And despite having a forward yield of 4.1% — compared to 3.1% for the Footsie as a whole – other high-quality stocks offer a better return. That’s why Lloyds isn’t for me.

Should you invest £5,000 in Lloyds Banking Group Plc right now?

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James Beard does not hold positions in any of the companies mentioned.

The post Over the next 12 months, the Lloyds share price and dividend could turn £5,000 into £5,641 appeared first on The Twelfth Magpie.

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