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After the share price of the last few years, I wondered if Lloyds (LSE: LLOY) shares will go down again! The stock has nearly tripled in just a few years – not to mention the above-average dividend yield. I thought about getting up and getting up FTSE 100 the bank looked unstoppable.
Then 2026 came. Due to many geopolitical events, the stock price has fallen. The dip from top to bottom this year was over 20%! Although it has returned few gains, you can still buy Lloyds shares today below the £1 mark – at 97p a pop as I write at midday on Friday (April 24). This would be a great opportunity to get cheap shares in a rising company, wouldn’t it?
Why did the stock price go down?
Before you answer that this would be a good opportunity to buy, it is good to point out what happened this year. The main driver of the falling value of Lloyds is the Iran conflict, which has two major consequences.
The first issue is the possibility of stagflation and economic stagnation. Lloyds’ tagline ‘Helping Britain Prosper’ reflects the inextricable link between the bank and the UK economy. Its exposure at home means any economic weakness caused by the war in the Middle East means the picture is much smaller than it was a few months ago.
The second is that inflation (if it happens) can lead to higher interest rates. When borrowing is more expensive, people default on loans. This disruption is detrimental to the bottom line and can be disastrous on a large scale. With the Bank of England already rumored to be eyeing a rate hike this year, it makes sense that Lloyds’ share price has been hurt.
Is it shopping?
On the other hand, higher interest rates can be beneficial for banks. The more expensive it is to borrow, the more flexibility there is to increase margins. This is one of the reasons why Lloyds has increased wages in recent years.
If earnings continue to rise, then we may see a continuation of the share buyback program. Shopping cannot be underestimated.
When people think of an FTSE 100 bank’s income, their eyes tend to go to dividend stocks – Lloyds is looking at a return yield of 4.4%, which is respectable but nothing spectacular. But using cash to buy shares and take them off the market puts upward pressure on the share price. This is one (though far from the only) reason why the share price has nearly tripled in recent years.
Here’s a final bonus: banking looks like one of the sectors that will benefit the most from AI. Lloyds expects the use of artificial intelligence to add £100m in value this year alone and who knows how much that could grow to in the future? I think the stock is worth considering.
