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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
I have a major concern about Lloyds (LSE:LLOY) shares. However, there are also things to like, notably the company\u2019s recent quarterly results. Let\u2019s take a look at these now.<\/p>\n
Excellent financial results <\/p>\n
The bank\u2019s first-quarter results for 2026 paint a positive picture.<\/p>\n
Net interest income (NII) was up 8% from the same quarter a year ago to \u00a33.6bn. This contributed to an overall net income increase of 9% to \u00a34.8bn.<\/p>\n
Operating costs were down 3% to \u00a32.5bn, and the impairment charge fell by 5% to \u00a3295m. This helped the company achieve a statutory profit after tax of \u00a31.6bn, a 37% rise from last year.<\/p>\n
And the bank improved its net interest margin from 3.03% to 3.17%. All of this shows that the firm is becoming more efficient, and this margin expansion is definitely a cause for optimism.<\/p>\n
The good news doesn\u2019t end there, though, as its guidance looks quite promising. The company\u2019s anticipating NII of \u00a314.9bn this year, a big increase from the \u00a313.6bn achieved in 2025.<\/p>\n
Furthermore, analysts expect its earnings per share to rise by 30.8% in 2026, then by a further 20% in 2027.<\/p>\n
However, even after this, one concern I have about Lloyds is its exposure to the UK housing market.<\/p>\n
A proxy for UK housing <\/p>\n
It\u2019s well known that Lloyds is the largest mortgage provider in the UK. It owns 19% of all mortgages outstanding, and the gross value of its annual lending is 16.8% of the mortgage market.<\/p>\n
The bank has also been quietly buying rental properties, boasting 7,500 properties valued at around \u00a32bn.<\/p>\n
Now, to see the full extent of the company\u2019s exposure to the sector, we can see its UK mortgage book of \u00a3323.1bn is 69.8% of its total interest-earning assets of \u00a3462.9bn for 2025.<\/p>\n
It also earned approximately \u00a34.9bn from mortgage interest last year, which was 36% of its NII and 27% of its total income.<\/p>\n
This isn\u2019t a concern for some. For example, Savills has forecast that while house prices are likely to fall in 2026, in total they should rise by 18.5% by 2030. This is good news both for Lloyds\u2019 mortgage interest and its property portfolio\u2019s value.<\/p>\n
I\u2019m not so enthusiastic <\/p>\n
However, I\u2019m a bit more pessimistic here. A big reason for house prices increasing in value is the supply issues arising from high population growth, combined with a slow rate of housebuilding.<\/p>\n
But I believe some factors have been overlooked. The UK has an ageing population and low birth rates. In fact, there are currently more deaths than births.<\/p>\n
Right now, the population\u2019s growth is being sustained by net migration. However, with an increasing anti-immigration sentiment in the UK, there are question marks about whether this will continue.<\/p>\n
And affordability is becoming a bigger issue than before. For a house to be considered affordable, it shouldn\u2019t be more than five times a full-time salary. However, the average house price is currently six to eight times higher.<\/p>\n
All of this should put downward pressure on house prices in the long-term, which could hurt both the banks\u2019 mortgage interest income and the value of its property portfolio.<\/p>\n
That\u2019s why I\u2019m not currently interested in Lloyds shares.<\/p>\n
Should you invest \u00a35,000 in Lloyds Banking Group Plc right now? <\/p>\n
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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.<\/p>\n
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?<\/p>\n
See The Six Stocks<\/p>\n
Muhammad Cheema does not hold any positions in the companies mentioned.<\/p>\n
The post The one thing about Lloyds shares that investors should be cautious about<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images I have a major concern about Lloyds (LSE:LLOY) shares. However, there are also things…\n","protected":false},"author":2,"featured_media":68603,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21256],"tags":[563,3692,2861,20306,31877,12859,31878,5],"class_list":["post-68602","post","type-post","status-publish","format-standard","has-post-thumbnail","category-lloyds-banking-group","tag-house-prices","tag-lloyds","tag-lloyds-banking-group","tag-lloyds-banking-group-plc","tag-mortgage-provider","tag-net-interest-income","tag-net-interest-margin","tag-uk"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116798883383531544","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/68602","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=68602"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/68602\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/68603"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=68602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=68602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=68602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}