Lloyds (LSE: LLOY), it’s unthreatening to say, has had a good run in 2024. The share price is currently 35% higher than it was a year ago, and the dividend yield is 5%.

However, Black Horse Bank trades on a price to earnings (P/E) ratio of 8. This may look inexpensive, but I see a number of risks that I think could cause the Lloyds share price to plummet this year – and I am discouraged from investing in it.

A faint and uncertain economic outlook could be bad news for banks

The first is obvious. Economy. It may not be completely buzzing for now, but at least it’s moving without making too much gurgling.

I think this may change though. I am concerned that there is a high level of geopolitical uncertainty that could harm both business investment and consumer spending, both of which could lead to a weakening economy. This is of great importance to Lloyds as it is the country’s leading mortgage lender.

While I see this as an advantage if the economy is doing well, the opposite is also true. If mortgage defaults boost, profits could drop dramatically. We’ve been there before – and we can get there again.

The first nine months of last year saw after-tax profits decline by 12% year-on-year.

Auto finance scandal could hurt profits

We’ve been elsewhere before: British banks had to pay out billions of pounds in compensation for the mis-selling of Payment Protection Insurance (PPI).

Apparently they didn’t learn their lesson and another consumer mis-selling scandal emerged, this time in the area of ​​car financing. The impact could be huge for such car dealers as they struggle to arrange financing under tighter controls.

But banks will not escape unscathed. Lloyds spent hundreds of millions of pounds on penalties and damages last year. It also eliminated commissions at its vast auto financing division, which could have long-term consequences for the profitability of the business.

As with PPI, we do not yet know how much penalties and damages may ultimately amount to once the dust settles on all the historic claims.

This is why I don’t invest

Still, even after putting that money aside last year, Lloyds managed to make huge (albeit reduced) profits in the first nine months, as I mentioned above.

It has deep strengths, including well-known brands, a broad customer base and a proven business model. The 35% gain last year may indicate that many investors have sensed a potential opportunity.

But is the Lloyds share price as inexpensive as it seems? This low P/E ratio could change rapidly if earnings decline significantly – I think this is a scenario that could occur if any of the above risks materialize.

In the current economic situation, I do not invest in shares of any bank – including Lloyds.