As Lloyds share price growth slows, is it time for me to bank profits?

After a huge rally, Lloyds Banking Group (LSE:LLOY) shares seem to be slowing. The price has paused near recent highs, and growth in the past month has even turned negative.

This isn’t a sudden thing – as a shareholder, I’ve been watching the price slip for over two months. So I can’t help asking, is this just a short dip, or the first sign of something worse?

Critically, the slowdown could reflect a wider issue. The UK banking sector’s facing pressure from interest rates and talk of higher taxes. If the sector hits a wall, even the strongest lenders will feel it.

So should I consider selling some of my Lloyds’ shares now – or do they still offer long-term value?

Valuation, results and broker views

Despite rapid price growth in recent years, Lloyds doesn’t look obviously overvalued. The shares trade on a price-to-earnings (P/E) ratio around 14, with a price-to-book (P/B) ratio near 1.6 – certainly not overvalued. And with a dividend yield close to 3.6%, that’s decent income and value appeal.

Meanwhile, its recent first-half 2026 results don’t make me want to run for the hills. Profit jumped 23% to £4.29bn while the bank kept up buybacks and lifted the dividend. Management has also outlined its Accelerate 2030 strategy, aiming to improve returns and efficiency over the long term.

So it’s no surprise that analysts remain encouragingly positive.

The consensus rating is Moderate Buy, with 12-month price targets typically in the 114p-125p range. For example, Jefferies recently lifted its target to 127p while keeping a Buy rating.

Bank of America is even more optimistic, recently upgrading its rating to a Buy and boosting its target to 140p, implying 20% growth in the coming year.

If the numbers are this strong and brokers are still upgrading, why’s the share price stalled?

A few factors to watch

There are genuine reasons to be cautious, not least of which is net interest margin pressure. As competition for deposits increases and rate expectations shift, the gap between what banks earn on loans and pay on savings can shrink, squeezing profits.

And let’s not forget the UK’s shifting political backdrop. There’s recurring talk of higher taxes on banks, which would directly hit returns. On top of that, UK lenders are heavily exposed to the domestic economy through mortgages and small- and medium-sized enterprise credit.

A sharper slowdown would mean more bad debts and higher provisions. These issues aren’t all unique to Lloyds, but the stock’s often seen as a key bellwether of the UK economy.

My verdict

The slight pullback in August looks more like normal consolidation after a strong rally than a clear warning sign. Fundamentals remain decent, and the dividend appeal is still strong, with a yield around 3.6% and ongoing buybacks returning cash to shareholders.

For long-term income investors like me, holding (or even adding) on weakness is worth considering. But it’s also reasonable to be concerned about the wider UK picture as policies change. 

The key really depends on what role Lloyds plays in your portfolio. For me, it forms a long-term core holding, not just an income play. So I’ll stick to my plan to hold through thick and thin.

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Mark Hartley owns shares in Lloyds Banking Group.