Lloyds shareholders are set for a bumper few years as analysts predict the bank will continue to splash cash on dividends and buybacks.
The bank has been tipped to move to a half-year buyback, in a move that will majorly ramp up the money it hands back to investors.
In 2025, Lloyds beat out its peers Barclays and Natwest for buybacks, with just a singular £1.7bn splurge announced following the lender’s 2024 full-year results in February.
“Lloyds has been a slow-burn story of long duration, holistically managed hedges supporting consistent delivery of guidance,” Jefferies analysts Jonathan Pierce and Priya Rathod said.
“But in 2026, the thesis gathers pace.”
Pierce and Rathod predicted the bank will announce its movement to a half-year buyback at its full-year results in February, where it is expected to hike its dividend per share near ten per cent to 3.5p and deliver a return on tangible equity (RoTE) of near 13.5 per cent.
This will come despite hit to the bank’s bottom line after it was forced to increase motor finance provisions to £2bn in October following the City watchdog releasing the proposals of its redress scheme.
But the rising RoTE – a crucial profitability metric showing how much profit a company generates from its physical assets and net tangible assets – indicates the bank will be able to absorb the hit and still plough ahead with shareholder distribution plans.
Lloyds to be ‘sector-leading’
Pierce and Rathod predict “mid-year” post 2026 aspirations will begin to emerge, where RoTE is forecast to rise to a “sector-leading” 18.5 per cent in 2028 and distributions to come 20 per cent ahead of consensus.
“That would leave the shares offering a 13-14 per cent yield, the best in Europe,” they added.
Lloyds shares surged past the 100p mark on Tuesday amid a wider rally in London’s blue-chips before giving up some gains later in the week.
The FTSE 350 bank index – where Lloyds is the top performer – has outpaced the FTSE 100 with a gain of near 50 per cent compared to the near 20 per cent of the wider index.
In August 2025, Pierce and Rathid predicted Lloyds would return over £17bn to investors by 2027 as the bank benefits from its old earnings hedged on lower rates maturing and being replaced with new ones at the present higher interest rates.
This boost from this strategy alone is set to add over £1bn to Lloyds’ profit in both 2027 and 2028, they said.