Lloyds Banking Group (LSE:LLOY) shares have surged after a sluggish start to the year. At 55.9p per share, FTSE100 the bank is now 17% more pricey than on New Year’s Day.

By comparison, the broader Footsie is up a more modest 6%. But I have no desire to buy the bank today. I really believe there could be a pointed correction in stock prices in the future.

Here are three reasons why I think the Lloyds share price could fall.

Soaring handicaps

The UK’s economic outlook in the miniature to medium term remains bleak, with major economic bodies expecting GDP to grow by around 1% over the next few years. Structural issues such as high national debt, trade barriers and labour shortages mean growth could remain faint in the near term.

Cyclical stocks like Lloyds are likely to struggle to grow revenue in this climate. But that’s not the only risk. The tough economic environment means that credit charge-offs could also continue to rise, even if interest rates fall.

On the positive side, Lloyds’ bad loans fell to £70m in the first quarter from £246m a year earlier. But the bank is not yet unthreatening. And its huge exposure to the mortgage market means that figure could suddenly rise again.

This is because mortgage interest rates will rise for 3 million households between now and 2026, according to the Bank of England (BoE). Of these, 400,000 will pay 50% more than they do now, the bank said.

As I say, Lloyds is particularly resilient to this threat. It provides about a fifth of all mortgages in the UK.

Margins crushed

Lloyds’ chances of boosting profits will become even more tough if, as the market predicts, interest rates are likely to start falling from the delayed summer/early autumn.

Banks make the lion’s share of profits by charging higher interest rates on loans than they offer to savers. This is known as the net interest margin (NIM) and is highly sensitive to the BoE’s credit benchmark.

Lloyds’ margins have been falling even before the BoE started cutting interest rates. Its NIM fell 27 basis points to 2.95% in the first quarter. So net interest income fell 12% to £3.1bn.

Ambitious rivals

Margin declines could become even more severe in the future, and not just because of interest rate cuts. Growing competition from digital and challenger banks is also putting pressure on the NIMs of established banks.

Fortunately for Lloyds, it has exceptional brand strength and a vast (albeit shrinking) presence on the high street, so it has a better chance of retaining and growing its customer base than many other banks.

But the threat from modern entrants remains acute. And things could get even more tough if, as expected, they boost their financial firepower by listing shares. Monzo, Revolut and Oaknorth are all tipped to IPO sooner rather than later.

This is what I do

On paper, Lloyds shares still look affordable despite recent gains. They trade at a price-to-earnings (P/E) ratio of just 8.6.

However, I think the risks of owning a bank outweigh the potential rewards. That’s why I’m buying other affordable FTSE 100 shares now.