Like getting enough sleep, avoiding social media, and building self-driving cars, buying shares below their intrinsic value is easier said than done. But it doesn’t have to be impossible.

For example, shares in Lloyds Banking Group (LSE:LLOY) have climbed 50% over the last year and now trade above the book value of the underlying business. So is the stock still cheap?

A results business

The Lloyds share price got a boost on Thursday (20 February) when the bank released its latest results. Profits might have been down, but investors were impressed with the wider news.

Pre-tax profits fell 19% in the last three months of 2024. But this was partly due to the bank setting aside £700m for potential motor loan liabilities.

On the positive side, lending margins expanded slightly during the quarter and Lloyds announced a dividend of 2.11p. By itself, that’s just over 3% of the current share price. The bank also announced plans to spend £1.7bn on buybacks – enough to reduce the share count by 4.25% at current levels.

All of this meant the stock went up over 5% in a day.

Book value

In doing so, Lloyds shares started trading at a price-to-book (P/B) ratio above 1. That’s the first time this has happened since 2019. 

When a stock trades below the book value – the difference between assets and liabilities – of the underlying business, investors have a margin of safety. At least, they do in theory. 

On paper, a company whose shares trade below book value could sell off its assets, pay down its debts, and give investors more than the share price in cash. That would be a good result.

Realistically, with a bank like Lloyds, this has always been unlikely. But with a rising share price meaning even that theoretical margin of safety has gone, is the stock now a big risk? 

Risks

The big uncertainty with Lloyds shares at the moment is the ongoing investigation into motor loans. The bank’s now set aside a total of £1.2bn to cover potential liabilities.

There’s no guarantee, however, that this will be enough. I’ve seen estimates that the final total could be closer to £3.9bn – more than triple the company’s currently planning for.

The Supreme Court is set to rule on the issue in April. But we don’t have any special information about what the outcome of the ongoing investigation is likely to be. That makes me very wary of trying to anticipate it.

If things go well, the stock could be set for another big lift, but it’s a big risk, from my perspective.

Investing principles

By itself, the fact Lloyds shares are trading above the firm’s book value doesn’t put me off. I don’t think the prospect of the bank liquidating all of its assets was ever really on the cards.

A higher share price however, does increase the overall risk with the stock. And it means I’m not willing to buy it at today’s prices – even though I probably should have done so a year ago.

Of all the ways to earn a second income, one that lets other people do the hard work sounds pretty appealing to me. That is exactly what happens in building a portfolio of blue-chip shares that pay dividends.

Here is how an investor (even one who is investing for the first time) could put £200 a week into buying shares and aim to build a second income of £9,091 a year only a decade from now.

Dividends can add up, especially over time

How does that work? Putting the money into dividend shares can start making returns. And those dividends can then be reinvested.

So as well as the ongoing £200 a week contribution, there ought to be a growing stream of dividends being reinvested (called compounding).

After a decade at a 7% compound annual growth rate, the portfolio ought to be worth almost £130,000. If it yields 7%, that would equate to an annual second income of, yes, £9,091.

Setting realistic goals and investing smartly

I use 7% as an example because I think it is a realistic goal for an investor in today’s market. That’s the case even when sticking to blue-chip shares.

Some shares yield 7% or even higher. The compound annual growth rate includes any capital growth too. So it could be possible to hit it even with shares yielding below 7%, on average. Then again, share prices can decline – no dividend is ever guaranteed to last.

So the smart investor will spread their risks with a diversified portfolio. And they’ll carefully assess the risks of a share, not just its potential rewards.

One share to consider

As an example of a share investors could consider, I would point to FTSE 100 insurer Aviva (LSE: AV). Its yield is 6.9%. The share price has also moved up handily over the past year, adding 11%.

Insurance is big business and likely to stay that way. But it can also be very competitive and close attention is needed to maintain underwriting standards.

As an example of what can happen when a company lacks the right competitive advantage and business discipline, consider Direct Line. Aviva is taking it over, which could help it add further economies of scale and expand its already huge customer base.

Then again, it could bring new risks. Integrating Direct Line could distract Aviva management from its core business. But with a strong brand, focused business model and deep insurance industry expertise, I continue to see Aviva as a company with the right elements in place for long-term success.

Getting ready to invest

Putting £200 a week into shares is a discipline that can create the capital to buy dividend shares.

But that money needs to sit in the right place if it is to be used to buy shares. So the first step an investor could take on their second income journey is choosing a suitable share-dealing account or Stocks and Shares ISA.

When I look back over the last five years, the Glencore (LSE: GLEN) share price has been on a huge roller coaster. Extraordinary market dislocation back in 2022 enabled it to deliver record profits and bumper returns. But since those dizzy highs, the stock has fallen over 40%. But now is not the time for me to panic and sell.

Enhanced shareholder returns

One fact that I have long liked about the business is its upfront dividend framework. Each year, it returns $1bn from its marketing operation and 25% of cash flows from its industrial sector to shareholders.

In 2025, it intends to pay out $1.2bn. Equivalent to $0.10 per share, that equates to a dividend yield of 2.5%. Nothing much to shout home about, one might say; but that figure is just the baseline.

Share buybacks

Another major contributor of shareholder returns this year will be buybacks. By August, Glencore will have bought back $1bn of its own shares. This will be funded from the sale of its agricultural business, Viterra.

However, that is not all. As part of the deal to sell Viterra, it will acquire 16% of the shares of the new owner, Bunge. It’s now actively looking into ways that it can accelerate returns to shareholders from this holding.

In total, over the past few years, it has bought back 10% of its entire stock. If the share price was flying high, then I might question this policy. Nothing could be further from the truth, though.

It has made it clear that as long as its share price remains depressed it will keep buying. This makes perfect sense to me.

It could use its free cash flow to go out and buy another mining company. But if it did that it would need to undertake due diligence as well as pay a premium for the miner’s assets. But with buybacks none of that matters. After all, it knows it assets better than anybody else.

Risks

One of the main reasons why a miner’s share price can fluctuate so wildly is because its profits are dictated by underlying commodity prices.

Coal, which continues to make up the vast majority of Glencore’s revenues, were extremely weak in 2024. Steelmaking coal prices fell 19% and energy coal fell 22%.

One issue that remains high on my radar is continued weakness in its smelting business. Record low treatment and refining charges for copper concentrates is leading to loss-making operations. It has already shut its Portovesme smelter. It is now actively looking at closing its smelters in South Africa.

Despite the undoubted short-term risks, I expect its share price to be trading significantly higher over the next decade and more. I remain absolutely convinced that a re-rate will come.

Copper is the metal that will transform the fortunes of Glencore. Demand for the red metal is predicted to surge over the next 20 years. Grid infrastructure, data centres, heat pumps, EVs. Copper is the common denominator. Without it, net zero and the AI revolution will be but a pipe dream.

The company is fron- running a re-rate by buying back its own stock, at rock bottom prices. And I am simply following its lead. That is why I recently bought some more of its shares for my Stocks and Shares ISA.

To date, the artificial intelligence (AI) story has largely been about the infrastructure buildout. That’s why companies such as Nvidia and Broadcom – which make AI chips for data centres – have done so well. We’re now rapidly moving into the ‘second phase’ of the technology however, where tech companies are rolling out innovative AI solutions designed to help other businesses improve productivity.

With that in mind, here are two growth stocks to consider buying now.

An AI powerhouse

First up is Amazon (NASDAQ: AMZN). The owner of Amazon Web Services (AWS), it’s one of the world’s leading cloud computing providers.

I think a lot of investors underestimate how big a player Amazon’s going to be in AI. Because, make no mistake, it’s going to be a powerhouse. Last year, CEO Andy Jassy said that he sees the technology as one of the company’s four pillars (alongside retail, Prime subscriptions, and cloud computing). And already, the company’s offering customers a broad range of AI applications.

We’re optimistic that much of this world-changing AI will be built on top of AWS.
Amazon CEO Andy Jassy

For example, in December, the company announced the launch of Amazon Nova. This is a suite of cost-efficient foundation models (large machine learning models that serve as a base upon which specialised applications can be built) designed to help customers build innovative applications and solve complex problems.

Other applications on offer from the tech giant include Amazon Q, a generative AI assistant that can be tailored to individual businesses, and Amazon Translate, a high-powered translation service.

Now, one risk with Amazon is that it’s still spending a lot of cash on the AI buildout (this year it expects to spend around $100bn). Further costs could hit profits.

Taking a long-term view however, I think this company will do very well as AI’s adopted by businesses globally.

A data specialist

The other stock I want to highlight is Snowflake (NYSE: SNOW). It specialises in data storage and analytics and serves a lot of well-known large-scale businesses today (think Sony, Sainsbury’s, and Deliveroo).

In recent years, Snowflake’s been incorporating AI solutions into its offer. As a result, customers can get access to AI (and apply it to their own data) without having to invest substantial sums in the technology themselves.

An example here is Snowflake Cortex AI. This enables customers to build bespoke generative AI applications using fully managed large language models (LLMs).

It’s worth noting that these AI products are already having a positive impact on Snowflake’s revenues. In November, the company raised its annual product revenue forecast.

A risk here is that the company’s facing competition from several other tech companies such as Amazon, Google, and Databricks. So it’s going to have to work hard to retain market share.

Profits are also still quite small at this stage. And company stocks with minimal profits can be very volatile at times.

Taking a five-to-10-year view however, I think the company will do well. That’s why I believe it’s worth considering for a portfolio today.

The FTSE 100 has a reputation for being steady, rather than spectacular, when it comes to investment returns. But Compass Group (LSE:CPG) might be an interesting exception.

Including the dividend, the stock has returned over 10% per year on average during what has been an unusually challenging last 10 years. I think it’s worth investors taking a closer look.

Contract catering

Compass Group provides catering services to places like hospitals, sports stadiums, and schools. In other words – places that would rather not be running their own food operations.

One obvious benefit to this type of business is that it’s not especially cyclical. Whatever’s going on with inflation or interest rates, people still need to eat. 

While there’s competition in this industry, Compass also has an important advantage over other operators. Specifically, its scale puts it in a better negotiating position with suppliers.

Strong established relationships with customers committed to long-term contracts is another advantage. Importantly, I don’t think either of these is going to change any time soon. 

Growth

Over the last 10 years, Compass has increased its revenues from around £17.4bn to just under £32bn. But earnings-per-share growth hasn’t been so spectacular – going from 54p to 62p.

There’s a big – and obvious – reason for this, which is the pandemic. People not going to offices or live events isn’t good for the firm that provides the catering. 

As a result, Compass took on debt and issued shares to raise capital. And despite both of these coming down in the last few years, the effects are still visible in the firm’s income statement.

That’s why the stock looks expensive at a price-to-earnings (P/E) ratio of 45. But once debt and equity levels recover, the multiple should retreat to around 29, even without further growth.

Outlook

A P/E ratio of 29 is still high – especially by FTSE 100 standards – but I think Compass is an unusually strong business. And its growth prospects look particularly impressive.

The most obvious growth strategy involves winning new contracts. And with its size giving the company a cost advantage, it’s in a position to offer competitive prices to potential customers.

Acquisitions are also a key part of how Compass grows. Buying existing businesses helps the firm get a foothold in new markets and it can then use its scale advantages to expand. 

This strategy can be risky – there’s a danger of overpaying for an acquisition that can’t be ignored. But it’s been very effective for the company so far and I expect it to continue.

Can the stock keep rising?

One of the big challenges Compass is facing at the moment is inflation. Both raw materials and staffing costs are rising and the company is going to have to find a way to work around this.

That being said, I don’t see obstacles for this type of business that come much bigger than the pandemic. This makes me think the next decade won’t be as difficult as the previous one.

As a result, I think Compass has a good chance of being one of the best FTSE 100 stocks over the next decade and believe investors who haven’t already taken a look should do so.

High dividend yields need to be treated with caution. On paper, they could be excellent for passive income. But sometimes they’re too good to be true. 

Let’s explore this by doing some maths.

An investment of £10,000 in a stock yielding 16.5%, would generate dividends of £1,650 in year one. Assuming the amount received was reinvested, income of £1,922 would be earned in the second year. Repeat this for another 18 years — a process known as compounding — and the investment pot will have grown to £212,089. At this point, the company will be paying annual dividends of £34,995.

This shows that, in theory, it’s possible to take a relatively modest lump sum and use it to generate a very healthy level of passive income. Yes, it’ll take a couple of decades but as they say, Rome wasn’t built in a day.

Is this really possible?

While such high returns are unusual, they do exist.

For example, based on the dividends it’s paid over the past 12 months, Liontrust Asset Management (LSE:LIO) is currently yielding 16.5%.

However, like most shares offering a double-digit yield, this figure needs to be treated with caution.

For the past three financial years, the specialist fund manager has maintained its dividend at 72p a share. Indeed, it looks as though this run will be extended to a fourth, when its results for the year ending 31 March 2025 (FY25) are declared.

However, the generous yield indicates a problem that’s been around for a while now. Namely, that the company’s share price keeps falling. Since its peak in September 2021, it’s down 81%.

And this fall has boosted the yield. At the end of FY22, it was 5.6%. As the stock price continued to fall – and the dividend remained unchanged – the return soared. It was 7% at the end of FY23, and 10.7%, a year later.

Date	Share price (pence)
31 March 2021	1,420
31 March 2022	1,274
31 March 2023	1,022
31 March 2024	672
21 February 2025	432

Buyer beware

This is a good example of why shares apparently promising high levels of passive income need to be treated with caution.

And in my opinion, the reason why Liontrust’s value is declining is because its assets under management (AuM) are getting smaller.

The company makes money by managing funds on behalf of its clients. But as the table below shows, its AuM have fallen during each of its last four accounting periods. If the funds acquired from buying other companies are removed, the position looks even worse.

Assets under Management	FY21 (£m)	FY22 (£m)	FY23 (£m)	FY24 (£m)	HY25 (£m)	Totals (£m)
At start of period	16,078	30,929	33,548	31,430	27,822	16,078
Net flows	3,498	2,488	(4,841)	(6,083)	(2,067)	(7,005)
Acquisitions	5,520	–	5,148	–	–	10,668
Markets and investment performance	5,833	131	(2,425)	2,475	201	6,215
At end of period	30,929	33,548	31,430	27,822	25,956	25,956

And if this trend persists, I think it’s inevitable that the dividend will be cut.

However, the company’s chair appears to interpret events differently to me. He confidently asserts: “The underlying business is in better health than it has ever been with regards to investment proposition, quality of people, reach of sales and marketing, and strengthening business infrastructure.”

If challenged, no doubt he’ll point out that the company’s profitable — it reported earnings per share of 13.67p for the first six months of FY25. But with this level of performance, it remains a puzzle to me how a dividend of 72p can be maintained. And I fear if it’s cut, there’ll be a major knock-on effect on the company’s share price.

For this reason, I don’t want to invest, despite the attractive dividend on offer.

The UK stock market is popular with passive income investors for a good reason. There are lot of high-yield shares to choose from – and many of them have long track records of generous payouts.

As an income investor my portfolio is full of dividend stocks. I don’t buy anything else. But I’m starting to wonder if I’ve got a bit carried away.

Looking through my companies, I can see that I own seven stocks with a forecast dividend yield of 9% or more.

These are very high-yield stocks. Such high yields can sometimes be a sign that the market is pricing problems ahead – possibly including a dividend cut.

Have I ended up taking too much risk in pursuit of a higher passive income?

Why I’m not (too) worried

I can’t rule out the risk of problems. Some of my stock selections are definitely tilted towards value – these shares are out of favour with investors at the moment. There could be good reasons for this that I’ve not yet spotted.

Interest rates are another factor. UK government bonds are considered to be risk free and are offering 4% to 5%.

All shares carry some risk, so it makes sense (to me) that some of my income-focused stocks need to provide higher yields, to reflect the risk of future losses.

However, I haven’t gone into these high-yielders blindly. I’ve checked the accounts and done some research. My analysis suggests these businesses are in decent health and should be able to sustain their dividends.

These holdings are also part of a larger diversified portfolio, including a broader mix of (lower-yielding) stocks.

I’d love to write about all of my high-yielders. But there’s not enough space for that here. Instead, I’m going to use the rest of this article to take a closer look at one stock I bought recently that offers a 10% dividend yield.

High risk, high reward?

The stock I’ve chosen is specialist lender International Personal Finance (LSE: IPF). This £266m business operates in nine countries, including Poland, the Czech Republic and Mexico.

IPF offers loans and credit cards to consumers with lower credit ratings who aren’t served by high street banks.

I see this as relatively risky, so I’ve started this investment with a fairly small position. Regulations can change around consumer credit, for example, so that even a well-run business can face a sudden change in trading conditions.

However, the company’s financial performance and clear strategy have given me confidence that this is a well-run business. The latest update from the company covering the third quarter of 2024 shows lending rising by 7% and a reduction in bad loan losses.

Its balance sheet looks well-supported to me and the shares trade on a 2025 forecast price-to-earnings ratio of just five, with a 10% dividend yield.

In my view, this low valuation reflects the risks in this business and has the potential to provide attractive shareholder returns.

For these reasons, I’m comfortable holding the shares. If the company’s 2024 results are as expected and the outlook for 2025 remains positive, I may consider buying a few more.

Today (21 February), Standard Chartered was the last of the FTSE 100’s five banks to reports its results for the year ended 31 December 2024.

Having the same year-end makes it easier to compare their valuations. With this in mind, I’ve used three popular tools to try and identify which is the cheapest.

1. Earnings

Based on their price-to-earnings (P/E) ratios, NatWest Group just pips Barclays (LSE:BARC) to the top.

However, two of the others are not that far behind.

Bank	P/E ratio
NatWest Group	8.48
Barclays	8.49
Standard Chartered	8.92
HSBC	9.04
Lloyds Banking Group	10.53

The outlier here appears to be Lloyds Banking Group. Its recent share price rally — and slightly disappointing earnings for 2024 — means its P/E ratio is now over 10. Most European banks trade at a multiple of between seven and nine.

2. Balance sheets

Using the price-to-book (P/B) ratio, HSBC appears to be the most expensive.

In contrast, Barclays’ is much lower than the others. It implies that if the bank ceased trading today, sold all its assets, and used the proceeds to settle its liabilities, there’d be 515p a share left over to return to shareholders. That’s a 68% premium to the current share price.

Bank	P/B ratio
Barclays	0.59
Standard Chartered	0.68
Lloyds Banking Group	0.87
NatWest Group	0.89
HSBC	1.03

According to McKinsey & Company, the average for 1,500 listed banks is 0.9. In fact, the management consultancy claims this is the lowest of all industries.

Some of this is explained by regulators requiring banks to hold more capital as a result of the 2007-2009 financial crisis. But it also suggests that investors are wary of putting their cash into the sector.

The earnings of banks can be volatile, as they’re often barometers for the wider economy. They’re also vulnerable to loan defaults. As Simon Edelsten recently wrote in the Financial Times: “Owning bank shares is like picking up pound coins in front of a steamroller – fun until you are flattened.”

3. Dividends

Many investors hold banking stocks in their portfolios due to the generous income on offer. However, based on their 2024 dividends, only three of the five pay more than the FTSE 100 average (3.6%). Of course, returns to shareholders are never guaranteed.

HSBC performs the best here. And the yield of 5.89% excludes the special dividend that was paid following the sale of its business in Canada.

Bank	Dividend yield (%)
HSBC	5.89
Lloyds Banking Group	4.78
NatWest Group	4.74
Barclays	2.75
Standard Chartered	2.47

4. My verdict

Based on a combination of all three measures, it looks to me as though Barclays comes top. It has the lowest P/B ratio and second-lowest P/E ratio. Okay, its dividend isn’t great but it does well enough in the other two categories to more than compensate for its less-than-generous payout. Having said that, compared to 2023, its dividend is now 5% higher.

Being honest, this result pleases me. That’s because I already own shares in the bank. I feel it vindicates my decision to buy last year, especially given that the share price has risen 87% since February 2024.

Its 2024 results showed a 24% increase in pre-tax earnings. And it’s less affected by the ongoing investigation into the alleged mis-selling of car finance. It says it’s on course to achieve its target of a return on tangible equity of “greater than 12%” by 2026 (2024: 10.5%).

For these reasons, I think Barclays is the FTSE 100’s cheapest bank and one that investors could consider holding for the long term.

Cash ISAs remain popular. Looking at government figures, there’s currently around £300bn stashed away in these products. If one is serious about building wealth, however, a Stocks and Shares ISA could be smarter. Here are three reasons to consider this type of ISA instead in 2025.

Investment funds

One advantage of Stocks and Shares ISAs is they (usually) offer access to investment funds. These products provide diversified exposure to the stock market and tend to generate much higher returns than cash savings products (like the Cash ISA, although admittedly it’s a safer option) over the long term.

An example of a fund (and one I think worth considering) is Fundsmith Equity. This is a popular product that is invested in about 30 different companies globally.

While this fund has had its ups and downs over the years (like all stock market-based investments), it has performed very well over the long term. Since its launch in late 2010, it has returned about 15% per year (before platform fees) – trouncing the returns from cash savings.

Investment trusts

Stocks and Shares ISAs also offer access to investment trusts. These are similar to funds by providing diversified exposure to stocks, however, they’re traded slightly differently, and often have lower fees.

One investment trust I’ve invested in (and I think is also worth others considering) is Scottish Mortgage. This is a growth-focused trust that invests in disruptive businesses like Nvidia and Amazon (it has nothing to do with Scottish mortgages!)

This trust can be volatile at times due its focus on tech stocks. However, over the long term it has done well, delivering a share price gain of about 430% over the last decade (roughly 18% a year).

Individual stocks

Perhaps the biggest advantage of Stocks and Shares ISAs, however, is that they offer access to individual stocks (both UK stocks and international ones). In other words, you can invest in individual businesses.

This is riskier than investing in a fund or investment trust. Because every company has its own risks and if something goes wrong, its share price is likely to fall.

On the flip side however, there’s potential for much higher returns. With stocks, it’s possible to make 100%, 200% or more from a single investment in a year.

One example of a stock that I believe is worth considering today is Uber (NYSE: UBER). A US-listed business, it operates the world’s largest rideshare platform.

This company is growing at a rapid rate at present. In 2024, the number of trips booked on its platform rose 19% while the company’s revenue jumped 18%.

Looking ahead, I see plenty of growth potential. While the company operates in many countries across the world today, it still has plenty of room to expand to new cities and offer new services (such as train/boat rides).

Now, this stock can be volatile at times. Recently it has been swinging around wildly on the back of concerns over Tesla’s robotaxis (which are a potential risk).

But over the last five years (which is generally the minimum recommended timeframe for investing in stocks), it has roughly doubled in price. And looking out over the next five years, I see the potential for further gains as the company expands into new markets.

Despite fears over the UK economy, rising inflation, and worries over a fresh mis-selling scandal, the Lloyds (LSE:LLOY) share price continues to strengthen.

At 66.7p per share, the FTSE 100 bank is up 21% since the start of 2025. This takes gains over the past year to a whopping 53%.

Yet following its rapid ascent, analysts believe Lloyds may struggle to continue its surge. But how realistic are broker forecasts for Lloyds shares? And should investors consider snapping the soaring bank up today?

Stable outlook

It’s important to say that some analysts’ predictions for the next 12 months differ wildly. One believes the Footsie firm will fall 20% in value over the next 12 months, to 53p per share.

Another believes shares will soar another 26%, to 84p.

However, the broad consensus is that Lloyds’ share price will remain stable over the next year. The average price target among 18 brokers is 65.8p per share. This is 1% lower than current levels.

Running out of road?

On paper, it’s hard to see how Lloyds shares will continue to climb without moving into ‘overbought’ territory.

With a price-to-book (P/B) value of one, investors are paying exactly what the bank’s net assets are worth.

Furthermore, Lloyds’ price-to-earnings (P/E) ratio of 9.8 times is now above its five-year average of 7.7 times. Given its uncertain growth outlook in 2025 and beyond, this valuation looks pretty juicy to me.

In fact, I believe Lloyds’ recent share price surge now puts it at risk of a potential pullback.

Tough conditions

One fear I have relates to the gloomy outlook for the British economy and what this could mean for Lloyds’ earnings. Unlike other FTSE 100 banks like Barclays and HSBC, the company doesn’t benefit from overseas exposure to counter problems at home.

This weighed on revenue growth in 2024, with net income falling 5% to £17.1bn. With the Bank of England (BoE) predicting UK GDP growth of just 0.75% this year, and competition from challenger banks and building societies rising, established banks will likely struggle to grow the top line.

Profits could also suffer if (as expected) interest rates continue falling. Lloyds’ net interest margin dropped 16 basis points last year to a paper-thin 2.95%, reflecting in part recent BoE rate cuts and those aforementioned competitive pressures.

On the plus side, interest rate reductions provide an economic boost that could help the bank’s revenues and limit loan impairments. Improving conditions in the housing market are another positive sign.

But on balance, external factors mean it could be another difficult year for the bank.

Car crash coming?

Yet arguably the economic environment isn’t the biggest danger to Lloyds’ earnings — and by extension, its share price — in 2025.

Investors also need to consider the possibility of eye-watering penalties if the bank is found guilty of mis-selling car finance. It previously set aside £450m to cover the potential fallout of a Financial Conduct Authority (FCA) investigation. This has been hiked by another £700m, Lloyds announced this week.

But the eventual cost could be even higher given the bank’s position as market leader. Ratings agency Moody’s predicts the final cost to the sector could be as high as £30bn.

All things considered, Lloyds shares might not be the best choice for investors today. I think they should consider exploring other UK shares instead.