Goldman Sachs Boosts Lloyds Banking Group to 'Buy' Amid Improving Fundamentals

Goldman Sachs has upgraded Lloyds Banking Group (LYG) to a 'Buy' from 'Neutral' and raised its price target to £0.99 from £0.87. The upgrade is based on improving fundamentals, including strengthening revenue diversification, sector-leading earnings per share growth, and attractive capital returns through dividend payments and share buybacks. Goldman Sachs expects Lloyds' core revenue to grow at an 8% compound annual growth rate through 2027, outpacing the sector average of 3%.

Goldman Sachs has upgraded Lloyds Banking Group (LYG) to a 'Buy' from 'Neutral' and raised its price target to £0.99 from £0.87. The upgrade is based on improving fundamentals, including strengthening revenue diversification, sector-leading earnings per share (EPS) growth, and attractive capital returns through dividend payments and share buybacks [3].

Goldman Sachs expects Lloyds' core revenue to grow at an 8% compound annual growth rate through 2027, outpacing the sector average of 3%. The investment bank cited strengthening revenue diversification, sector-leading EPS growth, increasing profitability, undemanding valuation, and attractive capital returns as key drivers for the upgrade [3].

Lloyds has been making significant strides in sustainable finance and digital innovation, which are contributing to its improving fundamentals. In the first half of 2025, Lloyds channelled approximately £9 billion into sustainable financing initiatives, bringing its total sustainable financing to more than £57 billion since 2022 [2]. Additionally, Lloyds has been driving digital innovation, with more than 20.9 million digitally active customers now banking with the bank, and 95% of retail transactions happening through digital channels [2].

The upgrade comes as Lloyds has received clarity on the motor finance compensation scheme, with the Financial Conduct Authority estimating total industry costs around £13.5 billion. Lloyds has confirmed that any changes to provisioning related to the motor finance issue would likely not be material to the group, allowing investors to concentrate on the bank’s fundamentals [3].

Lloyds' quarterly earnings per share (EPS) of $0.14 exceeded analysts' expectations, with revenue of $6.13 billion for the quarter. Koss Olinger Consulting LLC lifted its position in shares of Lloyds Banking Group PLC (NYSE:LYG) by 205.5% in the first quarter, according to the company's most recent disclosure with the Securities and Exchange Commission (SEC) [4].

The upgrade by Goldman Sachs reflects a positive outlook on Lloyds' ability to deliver on its strategic targets, including generating £1.5 billion in additional annual revenue from strategic sustainability and technology initiatives by 2026 [2]. However, investors should remain cautious and monitor the bank's performance as it navigates the evolving economic landscape.

References:
[1] https://uk.finance.yahoo.com/news/someone-had-invested-5-000-071100411.html
[2] https://fintechmagazine.com/news/how-is-lloyds-reaching-net-zero-with-sustainable-finance
[3] https://www.investing.com/news/analyst-ratings/goldman-sachs-upgrades-lloyds-banking-group-stock-to-buy-on-strong-growth-outlook-93CH-4169461
[4] https://www.marketbeat.com/instant-alerts/filing-koss-olinger-consulting-llc-raises-stake-in-lloyds-banking-group-plc-nyselyg-2025-08-09/