Lloyds Banking Group (LLOY.L) Q2’26 and Strategy Update Preview

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Lloyds Banking Group (LLOY.L) Q2’26 and Strategy Update Preview

Goldman Sachs Lloyds Banking Group (LLOY.L)

(with the curve having moved down since our last estimates update) and as we modestly

update our other income, cost and LLP estimates. Our EPS forecasts decrease by 2-3%

in these years, additionally impacted by a higher assumed price for share buybacks

(given the recent move higher in the share price) and updated capital return

assumptions.

Valuation: Altogether, our 12m price target decreases modestly to 126p (129p

previously) on our estimate changes. We value Lloyds using a P/E methodology applied

75%/25% to 2027/28E EPS at an unchanged 10.0x multiple. We are Buy rated. Key

downside risks to our view and price target include: 1) worse economic developments in

the UK; 2) materially lower NII given structural hedge impacts, deposit costs and

mortgage margins; 3) operating, remediation and credit cost overruns; and 4) lower

levels of capital generation and consequent shareholder return.

Exhibit 1: We expect a material improvement in Lloyds’ Exhibit 2: ...while trading at a discount to our broader

ROTE over the next five years to levels above our coverage European coverage

average... P/E multiple based on GS forecasts

ROTE by year

LLOY UK Average Coverage LLOY UK Average Coverage

22.0%

11.6x 20.0% 11.3x 10.9x

10.0x 18.0% 9.6x

9.2x 9.0x

16.0% 8.0x 8.1x 8.2x

14.0% 7.3x 7.3x 6.9x

6.3x 6.1x

12.0%

10.0%

2024 2025 2026E 2027E 2028E 2029E 2030E 2026E 2027E 2028E 2029E 2030E

UK average for 2030 excludes HSBC (for which our forecasts end in 2029E) and Source: Goldman Sachs Global Investment Research, LSEG Data & Analytics

Shawbrook (in order to present Lloyds vs the more comparable large bank peer

set). The same applies to “UK Average” in all subsequent charts.