As we approach the final months of 2024, many investors are keeping a close eye on the results Lloyds (LSE: LLOY). The bank’s share price has been a bit of a success story this year, with a range of macroeconomic factors and company-specific events driving it. Based on current trends and potential catalysts, I believe the Lloyds share price could end the year at around 65p. Here’s my reasoning.

Economic recovery

The UK economy has shown resilience in 2024, with inflation gradually falling and consumer confidence improving. The Bank of England has begun to ease its monetary policy and interest rates are starting to fall from their peak. This environment bodes well for Lloyds as it could lead to increased lending activity and improved net interest margins.

However, it should be remembered that economic forecasts can be capricious, and any unexpected economic slowdown could put pressure on a bank’s results and its share price.

Good results

The bank’s recent financial results have been encouraging. In its latest reported earnings, the bank posted a pre-tax profit of £4.51 billion for the last 12 months. A price-to-earnings ratio of 7.8 suggests it is still reasonably valued compared to its peers and historical averages, although its peers Barclays AND Standard Chartered Profits are expected to grow more dynamically in the coming years.

Discounted cash flow (DCF) calculations suggest the stock is trading at a whopping 51% below its estimated fair value. Additionally, the price-to-book (P/B) ratio of 0.8 suggests there could be a good opportunity here. Of course, that’s not a given, but it does show potential if management can continue to execute the strategy well.

Generous dividend

With a dividend yield of around 5%, Lloyds remains a favourite for income investors. The bank’s payout ratio of 41% suggests there is decent potential for dividend growth if earnings continue to improve. As interest rates stabilise or fall steadily, high-yielding dividend stocks could become even more attractive to investors looking for reliable sources of income.

Eyes on the future

Management has been investing heavily in digital capabilities, which should start to pay off in the form of improved customer experience and operational efficiency. The focus on streamlining operations and cutting costs could lead to higher profitability, potentially boosting the stock.

As the UK’s largest mortgage lender, the bank’s fortunes are closely tied to the housing market. While higher interest rates have cooled the housing market in 2024, recent signs of recovery and government measures to boost home ownership could provide a significant boost to the mortgage sector.

While I am sanguine here, it is crucial to acknowledge the risks. A major economic downturn, geopolitical tensions or unforeseen regulatory changes could all have a negative impact on the bank. As always, the regulatory landscape remains challenging, but the company has demonstrated its ability to navigate these waters effectively.

It’s worth watching

Taking these factors into account, I believe the Lloyds share price could reach 65p by the end of 2024. This represents a modest but respectable enhance from current levels, reflecting both the bank’s growth potential and the challenging environment in which it operates.

However, investors should remember that such predictions are inherently uncertain. To me, the attractive dividend yield and solid fundamentals of the company make it an captivating prospect for long-term investors. For now, I will add it to my watchlist.