Lloyds (LSE:LLOY) has seen its share price raise by an impressive 7.4% over the past month. Given the up-to-date threats created by the war in Iran and after the stunning share price rise in 2025, this is, in my opinion, extraordinary growth.

However, my opinion remains unchanged. As it stands and at 101.7p, Lloyds shares are at risk of a edged correction. And my pessimism increased even more after up-to-date news emerged on Tuesday (April 14).

So what happened?

Like any retail bank, Lloyds is at the mercy of wider economic conditions. When the economy slows and consumers feel hurt, demand for credit cards, loans, insurance and other discretionary products may decline. Loan impairments may also raise as borrowers struggle to repay.

Unfortunately for this reason FTSE100 bank, has no exposure to high growth economies. It derives almost 100% of its profits from the UK. The economic prospects in the domestic market are constantly deteriorating.

Today’s projections from the International Monetary Fund (IMF) illustrate this. The body lowered its global growth forecasts due to shocks from the crisis in the Middle East. However, the UK has suffered the largest downgrades of any major economy.

Bad signs

UK GDP is now expected to grow by 0.8% in 2026, up from 1.3% previously forecast in October. The IMF also lowered its growth forecast for 2027 by 0.2% to 1.3%.

These revised estimates reflect the shock of higher energy prices and their impact on broader inflation and interest rates. The authority predicted inflationraise again temporarily to 4% and then return to the target by the end of 2027“.

Higher interest rates benefit banks’ net interest margin (NIM), a key measure of profitability. This is because Lloyds and its competitors tend to raise the amount they take out in loans faster than the amount they pay in savings. The problem is that interest rate rises could have a negative impact on banks in already arduous times, especially those dependent on a sturdy housing market such as Lloyds.

For retail banks, however, the situation is likely to become more arduous the longer the conflict in Iran drags on, increasing pressure on the economy. Incidentally, today’s downgrade by the IMF is the second in just a matter of weeks, after the Organization for Economic Co-operation and Development (OECD) lowered its economic growth forecasts for the UK in overdue March.

What’s next for Lloyds?

The thing is, I don’t think these growing risks will be reflected in the Lloyds share price. And this creates the risk of a edged correction. The price-to-book (P/B) ratio of 1.4 shows that the bank is offering a significant premium to its balance sheet assets. It is also well above the 10-year average of 0.9.

FTSE Bank has the tools, such as a sturdy brand and a wide range of products, to aid it remain profitable. Continued cost cutting should also support results. However, the vast and growing risks it faces mean I won’t be buying Lloyds shares for my portfolio.