Why Lloyds Bank shares led FTSE 100 to fresh highs
Things were looking pretty grim for the high street lender just a few weeks ago. Now the shares are the hottest show in town. City writer Graeme Evans explains why.
21st January 2025 13:43
by Graeme Evans from interactive investor
Another surge by Lloyds Banking Group (LSE:LLOY) today made the lender the surprise pacesetter in a FTSE 100 index that’s outperformed most major benchmarks so far in 2025.
Lloyds rose 2.3p to 60.9p after the Financial Times reported a move by the Treasury seeking to reduce potential liabilities in the current mis-selling case facing car finance providers.
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In a submission ahead of a forthcoming hearing in the Supreme Court, the Treasury said the matter has scope “to cause considerable economic harm and could impact the availability and cost of motor finance for consumers”.
It is seeking to ensure that “any redress is proportionate to the loss actually suffered and to avoid conferring a windfall”.
Today’s disclosure comes as chancellor Rachel Reeves attends the World Economic Forum in Davos as part of attempts to build up the UK’s pro-business reputation.
Shore Capital called it a “significant development” given that some estimates have pointed to industry liabilities as high as £30 billion.
According to the broker, other listed stocks with potential exposure include Close Brothers Group (LSE:CBG), Barclays (LSE:BARC), Paragon Banking Group (LSE:PAG), S & U (LSE:SUS), Secure Trust Bank (LSE:STB) and Vanquis Banking Group (LSE:VANQ).
Lloyds shares finished 2024 at just below 55p, having slid from October’s 62p after the Court of Appeal sided with consumers by ruling it was unlawful to pay a commission to a car dealer without the buyer’s “fully informed consent” to the payment.
Source: TradingView. Past performance is not a guide to future performance.
Close Brothers and another firm were then granted permission to take the matter to the Supreme Court, with this case due to be heard in April.
The weak finish to 2024 came despite Lloyds’ chief executive Charlie Nunn reaffirming full-year guidance in October’s “robust” third-quarter results, with growth in income alongside cost discipline and strong asset quality.
Nunn later warned in December that the car loan issue risked creating an “investability problem” for Britain’s consumer finance sector.
The recent revival for Lloyds leaves its shares 11% higher so far in 2025, just ahead of double-digit rises for Airtel Africa Ordinary Shares (LSE:AAF), Pershing Square Holdings Ord GBP (LSE:PSH), Antofagasta (LSE:ANTO), Scottish Mortgage Ord (LSE:SMT) Investment Trust and Experian (LSE:EXPN).
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The support of larger capitalisation stocks RELX (LSE:REL), Barclays, Shell (LSE:SHEL) and BP (LSE:BP.) after their valuations rose 9%, means the FTSE 100 index is up by more than 4% in the first three weeks of 2025.
Above 8,500 for the first time in its history, the top flight’s year-to-date advance places it ahead of the 2% improvements seen on Wall Street. London still has some catching up to do, however, after back-to-back years of more than 20% rises by the S&P 500 index.
Source: TradingView. Past performance is not a guide to future performance.
Stock markets in France and Germany are up by about 5%, whereas UK mid- and small-cap stocks are among the laggards so far this year amid flat performances by the FTSE 250 index and FTSE AIM 100.
The improved FTSE 100 showing reflects its large exposure to mining stocks, which have benefited from recent signs of stronger growth by China’s economy.
An oil price which has already risen by 7% in January has boosted BP and Shell, while the start of Wall Street’s earnings season has led to fresh optimism in the UK banking sector.
In contrast to Lloyds, the shares of rival NatWest Group (LSE:NWG) ended last year as one of the top-performing stocks in the FTSE 100 index. It has no exposure to the motor finance sector.
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