Lloyds Bank Shares (LON: LLOY) Get Hefty Price Target Upgrade

Lloyds Bank shares (LON:LLOY) have received an upgrade from Kepler Cheuvreux, which revised its rating from ‘Hold' to ‘Buy' and established a price target of 97 GBp, signaling a potentially brighter outlook for the stock.

This optimistic view is supported by strategic financial maneuvers and efforts to address significant industry challenges. Coming as the bank reports a potentially material increase in liabilities for motor finance has given markets plenty to digest. Shares are lower on the day, with the hit to finances clearly taking precedence on near term sentiment.

A key factor underpinning the positive sentiment is Lloyds' substantial share buyback programme, initiated in February 2025. This initiative aims to repurchase up to £1.7 billion of the bank's ordinary shares by the end of December 2025, executed through Morgan Stanley & Co. International plc.

The reduction in share capital is intended to bolster shareholder value, with consistent repurchases demonstrating the bank's commitment. For example, on September 18, 2025, Lloyds acquired approximately 3.29 million shares at an average price of 83.5333 pence per share, and on May 27, 2025, over 12 million shares were repurchased at an average price of 78.5 pence per share.

However, Lloyds faces significant challenges, particularly concerning the UK motor finance mis-selling scandal. The bank has allocated substantial provisions to address potential customer compensation. In February 2025, Lloyds reported a 20% decline in annual profit, primarily due to setting aside £700 million for potential customer compensation linked to this issue, part of a total £899 million allocated for remediation costs in 2024.

The Financial Conduct Authority (FCA) has proposed a redress scheme that could cost the industry up to £11 billion. Lloyds has already provisioned £1.15 billion, the highest among its peers, with analysts from Citi and Jefferies predicting this could rise to £1.5 billion. This scandal involves approximately 14.2 million car loans sold between 2007 and 2024, where commissions and dealer-lender relationships were not properly disclosed. Following these developments, Lloyds' shares experienced a temporary dip of 2.6%.

Despite these challenges, markets have reacted positively to Lloyds' handling of the motor finance scandal, with some analysts suggesting the potential financial impact may be less severe than initially feared. This perception has helped to stabilize the stock and contributed to the positive sentiment following the Kepler Cheuvreux upgrade.