Vodafon (LSE:VOD) i LloydsThe stock (LSE:LLOY) is two of the most widely held shares in the UK. And now they arouse stern emotions.

Lloyds is up 29.7% over the last 12 months, while Vodafone has done even better, growing 48.8% over the same period. Anyone who saved £1,000 last June can now earn between £1,297 and £1,488.

So, with both companies currently trading at or above the £1 level, the race to £2 is well underway. But which of them will get there first?

Will Lloyds be able to keep climbing?

Let’s start with the British banking giant. In the first quarter of this year, Lloyds’ net income increased by 9% to £4.8 billion, while delivering a powerful return on physical equity of 17%. This is well above management guidelines. In the words of CEO Charlie Nunn, the bank demonstrates: “sustained strength in financial performance.”

However, investors should consider some areas of real concern. It is no secret that Lloyds’ results are very sensitive to the British economy. And with inflation, particularly in energy prices, set to hit households and businesses by the end of the summer, the risk of higher loan default rates is starting to grow.

After all, on top of the pressure from higher prices, the Bank of England may have to respond with higher interest rates. This sounds good on paper as it helps escalate Lloyds’ profit margins. But at the same time it reduces the demand for recent loans, especially mortgage loans.

Does Vodafone have an advantage?

Looking at Vodafone’s situation, the progress of this telecommunications company begins to seem real. The latest full-year results show that the group’s organic services revenues increased by 5.4%, underlying profits increased by 4.5%, and in the 2026 financial year (ended in March), the company returned a whopping €3.1 billion to shareholders.

Perhaps most importantly, Germany – its largest and most troubled market – is finally back on the path to growth after years of decline. As CEO Margherita Della Valle put it: “Vodafone has gained broad momentum.” Three UK’s integration is also progressing ahead of schedule, which should unlock material cost synergies and lend a hand escalate free cash flow in the UK.

However, the bear case focuses on one number: €52.6 billion in debts and equivalents.

Even with improved free cash flow and the sale of non-core assets, it will take years to deleverage such a enormous balance sheet. And because Three UK’s integration is still in its early stages, any setbacks in implementation could delay generating the cash needed to bring that figure down.

Which one will reach 2 pounds first?

Of the two races, in my opinion, Vodafone looks the more fascinating to watch. Geographic diversification, faster revenue growth and structural improvements give it more leverage to apply. If debt continues to decline and Germany continues its economic recovery, the path to £2 will become more credible in the coming years.

To be fair, Lloyds is a high-quality bank that delivers impressive numbers. However, its almost complete dependence on the UK economy makes it more vulnerable to the currently mounting inflationary pressures.

That’s why I’m paying more attention to Vodafone stock and think investors should consider digging deeper.

Should you invest £5,000 in Lloyds Banking Group Plc now?

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Zaven Boyrazian does not hold any position in the companies mentioned.