Lloyds (LSE:LLOY) shares continue to soar even while the UK economy still struggles for growth. Stronger-than-expected profits have convinced the market the bank can thrive even if broader conditions remain tough. More robust dividends and share buybacks have also encouraged investors to pile in.

At 112.7p, Lloyds’ share price is up 14% since the start of 2026. Over 12 months, the FTSE 100 share is up a staggering 53%. The latter figure dwarfs the 20% rise the wider blue-chip index has enjoyed since last July.

And if analysts are correct, Lloyds shares haven’t finished climbing yet.

But why?

Banking stocks can benefit from higher interest rates. That’s because they typically raise the rates they charge borrowers more quickly than the rates they pay to savers, boosting their profit margins.

In Q1, Lloyds posted forecast-beating earnings as its net interest margin (NIM) improved to 3.17% from 3.05% a year before. And it tipped net interest income (NII) for the full year to beat prior targets, as the Iran war fuels a higher interest rate environment than was previously anticipated.

With costs also under control and low impairments, the Black Horse Bank has the bit between its teeth. The question is, can Lloyds continue outperforming? I’m not so sure.

The UK economic outlook continues to deteriorate, threatening loan growth and broader product demand. Bad loans might also swell on a blend of weak growth and those higher interest rates.

Lloyds also faces whopping penalties for mis-selling motor finance, while surging competition puts revenues and margins under growing strain.

What could Lloyds shares be worth in one year?

As I say, analysts are confident Lloyds’ share price can continue climbing sharply. Their consensus view is the bank will trade at 121.4p per share by July 2027. That’s up 8% from today’s levels.

If that’s accurate, £10,000 of Lloyds shares bought in a Stocks and Shares ISA will be worth £10,799 by next year. Add in predicted dividends of 4.3p per share, too, and the total return could be £11,182.

But I’m not convinced by analysts’ price forecasts. And it’s not just for the risks I’ve outlined above. It also comes down to the poor value the bank offers following its impressive bull run.

By almost any measure, Lloyds shares are mighty expensive. This might put an end to its stunning gains of the past year. But that’s not my only fear. Lloyds may even slump if investors continue switching into value shares.

The bank looks pricey on expected profits, with a price-to-earnings (P/E) ratio of 11.2 times above the five-year average of 8.4. The dividend yield of 3.8% is also a good distance below an average of 5.7% since summer 2021.

The bank’s price-to-book (P/B) ratio of 1.3 also sails above the five-year average of 0.8. While Lloyds’ performance has been impressive in tough conditions, I’m struggling to see how its current share price can be justified.

Are Lloyds shares a buy?

Yet, here’s the thing. Lloyds’ share price has been poor value for more than a year now. But that hasn’t stopped the FTSE 100 bank hitting stunning new heights.

That said, it’s important to note how ‘frothy’ Lloyds shares look today, and the risks that could pull it lower. Despite its recent strong momentum, I’d rather find other UK shares to buy.

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Royston Wild does not hold any positions in the companies mentioned.