I made a terrible mistake when I bought it Lloyds (LSE: LLOY) in 2023. I didn’t buy enough of them. What was I thinking?

Of course I liked this stock. I’ve followed this for years because FTSE100 the bank put itself back together after the financial crisis. The stock had been steady for years, but after the cleanup was done, I thought it was their time.

But the rest of the market didn’t see it the way I did. I thought it was a flashy buy, with a price-to-earnings (P/E) ratio of just five or six and a price-to-book (P/B) ratio of 0.4. The forward profitability also exceeded 5%.

FTSE 100 growth star

I’m no better at timing the market than anyone else. In my opinion, it’s impossible to guess share price movements, but Lloyds seemed primed for growth. Worried I had missed something, I didn’t go all the way.

I won’t be the only one kicking myself. When a top blue chip like this grows 75% in one year and 106% in two years, many investors will be annoyed that they missed out. However, even with the super strength I see in hindsight, I’m still a bit amazed at how brilliantly the Lloyds share price has performed.

Of course, it helps that a lot of money was made. In 2023, it announced an after-tax profit of £5.5 billion, up more than 40% from £3.9 billion in 2022. This is when motoring really took off.

However, shares rose even as profits fell 20% in 2024 to £4.5 billion. This was largely due to provisions for the automotive finance mis-selling scandal, to which Lloyds allocated £1.15 billion. The other gigantic FTSE 100 banks largely fled, so Lloyds tracked them for a while.

He still expects compensation, but not as much as initially feared. And when the board found funds to finance a £1.7 billion share buyback in February, investors thought it was a good solution.

However, Lloyds’ success remains surprising given its bulky involvement in the British economy, which is currently not in the best shape. It is the country’s largest mortgage lender through its Halifax subsidiary, but investors only need to look at the behavior of housebuilding companies to see that the UK property market is not booming.

Dividends, buybacks, growth

Like all banks, Lloyds has benefited from higher interest rates, which have boosted its net interest margin, a key indicator of profitability. However, with the Bank of England expected to cut interest rates on December 18 to 3.75% and at least double that in 2026, this could end.

So there are reasons why Lloyds shares are doing well, but are they doing that well? I’m still a little surprised, although I’m not complaining.

They are no longer the bargain they once were. Today’s P/E is just over 15, and the P/B ratio has increased to 1.25. The final dividend yield has dropped to 3.34%, although management remains committed to rewarding shareholders, recently increasing the interim payout by 15%. So I expect this income to continue to raise over time.

I still think Lloyds shares are worth considering over the long term. I just wouldn’t expect them to jump another 75% next year – but like I said, who really knows?