UBS has raised its price target on Lloyds Banking Group PLC (LSE:LLOY) to 103p from 90p, citing progress towards the end of its current five-year strategy under chief executive Charlie Nunn and finance director William Chalmers.
However, the bank kept its 'neutral' rating, pointing to questions over growth beyond 2026 and the stock’s valuation already reflecting near-term momentum.
The UK lender is due to report full-year 2025 results and guidance for 2026 on 29 January, which marks the final year of its 2022–26 strategic plan.
UBS estimates Lloyds could deliver pre-provision profit growth of around 25% year on year in 2026, excluding motor finance remediation costs, supported by around 8% growth in net interest income and modest cost inflation. Other operating income is expected to rise 8–10%.
That performance would be “attractive momentum from a well-regarded team,” the analysts wrote, adding that investors are “keen to back [management] to deliver on their numbers.”
The key focus, however, will be what comes next. UBS highlighted three factors likely to dominate investor attention in the coming quarters: the outlook for net interest income momentum beyond 2026, particularly from hedge contributions; the medium-term return on tangible equity; and any signals around mergers, acquisitions or international expansion.
Lloyds’ net interest income in 2025 was roughly 22% above 2021 levels, UBS said, compared with a 58% rise at NatWest, leading some investors to believe Lloyds may benefit from more persistent hedge tailwinds in future years.
UBS's valuation implies Lloyds is trading on 10.8 times 2026 earnings and 9.5 times for 2027, with a return on tangible equity expected to reach 15.8% in 2026 and 16.8% the year after.
On 2026 estimates, the bank is valued at 1.6 times tangible net asset value, with an implied cost of equity of 11%, in line with the European sector average.
The revised 12-month price target of 103p implies just under 2% upside from the current price of 101p, as of 19 January.