Lloyds (LSE: LLOY), I believe it’s truthful to say, had a very good run in 2024. The share price is now 35% increased than it was only one yr in the past, with a 5% dividend yield in addition.

But the Black Horse financial institution trades on a price-to-earnings (P/E) ratio of 8. Which will make it look low cost, however I see quite a few dangers I worry might carry the Lloyds share price crashing down this yr – and put me off investing in it.

Weak unsure financial outlook may very well be unhealthy information for banks

First is the plain one. The financial system. For now, it might not precisely be buzzing, however it’s no less than shifting alongside with out spluttering an excessive amount of.

I reckon that would change, although. There’s a excessive stage of geopolitical uncertainty that I worry might damage each company funding and shopper spending, each elements that would result in a weaker financial system. That issues – heaps – for Lloyds as it’s the nation’s main mortgage lender.

Whereas I see that as a power if the financial system does effectively, the reverse is true too. If mortgage defaults go up, earnings might fall dramatically We’ve been there earlier than – and we might get there once more.

The primary 9 months of final yr noticed post-tax earnings decline 12% year-on-year.

Automotive finance scandal might damage earnings

Some place else we’ve been earlier than is British banks having to pay out billions of kilos in compensation for mis-selling cost safety insurance coverage (PPI).

Seemingly, they didn’t study the lesson totally and one other shopper mis-selling scandal has arisen, this time within the automotive finance subject. The impression of this may very well be enormous for the likes of automotive dealerships struggling to rearrange finance underneath an surroundings of tighter scrutiny.

However the banks won’t get off scot-free. Final yr, Lloyds put aside tons of of thousands and thousands of kilos for fines and compensation funds. It additionally scrapped commissions in its giant automotive finance arm, which might have long-term implications for the profitability of that enterprise.

As with PPI although, we don’t but know the way a lot fines and compensation might lastly add up to as soon as the mud settles on all historic claims.

Right here’s why I’m not investing

Nonetheless, even after setting apart that cash final yr, Lloyds managed to make enormous (albeit lowered) earnings within the first 9 months, as I discussed above.

It has deep strengths together with well-known manufacturers, an unlimited buyer base and a confirmed enterprise mannequin. The 35% rise up to now yr might point out that many traders have scented a possible cut price.

However is the Lloyds share price as low cost because it appears to be like? That low P/E ratio might change at a stroke if earnings fell badly – a state of affairs I believe might occur if both of the above dangers involves go.

Within the present financial surroundings, I’m not investing in any financial institution shares – and that features Lloyds, for certain.