The Lloyds Banking Group (LSE: LLOY) share price is up round 15% in 2024. I’ve been bullish on Lloyds for fairly a while, however my optimism hasn’t borne a lot fruit but.

So right this moment I’ve my bear hat on and I’m serious about issues that may go fallacious with the financial institution’s shares in 2025.

Misselling and curiosity

The Monetary Conduct Authority’s (FCA) at present trying into alleged misselling within the automobile mortgage enterprise. Lloyds has already put aside £450m as a reserve. If it seems badly, it could possibly be loads worse than that.

Financial institution of England fee cuts have already shaved a bit off Lloyds’ curiosity margins, and there’s positive to be extra to return. Lloyds makes most of its revenue from lending, in order that’s an extra risk for 2025.

On the intense aspect, elevated lending might offset margin weak spot. However potential debtors might nonetheless be underneath stress in 2025.

It’s the financial system

A drying jobs market suggests we would see a recession. Oh, and the UK financial system shrank for 2 months to October. It won’t take an excessive amount of extra to tip us over the sting.

However the housebuilders are nonetheless sturdy, proper? And because the UK’s largest mortgage lender, Lloyds ought to certainly profit?

Effectively, early in 2024, the Competitors and Markets Authority began probing what it known as “information sharing” between the massive FTSE housebuilders. They mentioned it “could possibly be influencing the build-out of websites and the costs of latest houses“.

There’s been no conclusion but, and any potential impact available on the market can solely be guesswork. However isn’t it the sort of uncertainty that would additional maintain again folks considering of borrowing to purchase a brand new residence?

Struggling for progress

Within the third quarter, Lloyds recorded an increase in underlying loans of just one%. Contemplating the reliance Lloyds has on lending for its income, progress as weak as that doesn’t look anyplace close to adequate to me to offset the dreaded discount in curiosity margins in 2025.

And that was for the quarter ended September 30. It was earlier than we noticed the financial shrinkage lengthen to October, and earlier than recruiters began reporting fewer job openings.

And will we be set for a revival of the so-called challenger banks, which had been consuming their means into the market earlier than the good monetary disaster? Some are beginning to look sturdy once more, and I might see an actual risk rising there.

Promote out, proper?

So what does all this negativity imply for me? I should be set to promote my Lloyds shares, sure? Effectively, no, in no way. The factor is, all these items are recognized, and I reckon plenty of the hazard is already constructed into the share price. We’re, in any case, a ahead price-to-earnings ratio of solely 8.5.

I believe issues must prove a good bit worse than I count on for that to look too costly. It’s the as-yet unknown threats that scare me probably the most. And I don’t know what they’re.