How much might Lloyds (LSE: LLOY) shares benefit from artificial intelligence? According to some of the bolder predictions, very much so. The finance sector has been highlighted as one of the primary areas that AI could transform. McKinsey Global Institute said: “Among individual sectors, generative AI offers one of the greatest economic opportunities in banking.”
In the best-case scenario, that might mean a bank like Lloyds might enjoy years of cost-cutting, elevated earnings, and a share price that takes off like a rocket.
Should investors be flooding into Lloyds like no tomorrow on the back of AI-related optimism? Or are the effects of current models of AI simply, as the Americans like to say, a ‘nothing burger’? Here’s what I think.
Priced in?
Firstly, it should be pointed out that big business incorporating artificial intelligence is hardly breaking news. There is a strong possibility that the benefits of AI could already by ‘priced in’ to the share price. That the shares nearly tripled since 2024 lends credence to this theory.
Then again, the AI revolution might be enough for the share price to repeat the trick. If the shares were to triple from its current price of 114p then they would reach 342p. Could that be possible?
Well, Lloyds has been transparent in earnings calls on the introduction of the new technology. It stated that generative AI has saved £50m in 2025 and is expected to save £100m in the current financial year. The general plan, labelled ‘Accelerate 2030’, will save £2bn up to the year 2030 if things go smoothly.
Those aren’t massive numbers for a firm with a £50bn market cap, but the trajectory is impressive. The proposed improvement of return on tangible equity (ROTE) from 15% to 20% shows that AI could make Lloyds a more efficient business.
A buy?
There are negatives here too. One that has been circulating of late is the effect on young workers. New graduates are the most likely to be replaced with AI. While lower wage costs look good on an income statement in the short term, what happens later down the line when experienced workers are in short supply?
Another might be the growing backlash against AI. People are seeing layoffs, dwindling water supplies, and rising electricity prices. So when customers see the ‘AI financial assistant’ (as Lloyds is calling one of their initiatives), it may put them off.
This is not even mentioning that large language models are making meagre improvements on their hallucination problems. I was asking an LLM about a comedy line I was trying to remember and it invented a new episode of Peep Show that never existed. While AI is happy to be ‘confidently incorrect ’ it’s hard to see how it could be relied upon at scale.
In my view, it’s hard to ascertain just how impactful AI will be on business (or the world, for that matter) in the long run. There will undoubtedly be some big winners in the future on stock markets today. Could Lloyds be one? Maybe. I think it’s worth considering.
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John Fieldsend owns shares in Lloyds.
This story originally appeared on Motley Fool
