It’s been a pretty miserable couple of months for Lloyds‘ (LSE:LLOY) share price. Since hitting its 2026 peak of 117.9p in early August, the FTSE 100 bank’s fallen steadily, last seen at 103.7p.

Look, Lloyds’ shares haven’t fallen off a cliff. They’re still up by mid-single-digit percentages for the year to date, as investors anticipate higher interest rates boosting Lloyds’ net interest income (NII).

However, doubts over the bank’s net interest margins (NIMs) and broader profitability are growing. Analysts at RBC Capital for instance are becoming more concerned, and have just slashed their share price estimates for the bank.

So what have they said? And should investors still consider buying Lloyds’ shares today?

What’s going on?

In a note on Friday (16 October), RBC analysts Benjamin Toms and Pablo de la Torre Cuevas cut their forecast for Lloyds’ share price to 115p. That’s down from the previous estimate of 124p.

Furthermore, they cut their rating on the bank to Sector Perform from Outperform, meaning they now only expect them to perform broadly in line with the broader banking sector.

They commented:

Whilst structural hedge repricing should provide the bank with a material NII tailwind… [our] downgrade reflects our more cautious view on competition in the UK deposit market and second order implications for NIM, a dynamic we believe is underappreciated.

What does this mean?

The structural hedge is money that banks invest in secure, interest-paying assets to generate steady income. In recent times, the likes of Lloyds have benefitted as older investments have matured and been replaced with ones paying higher interest rates.

The good news is that with inflation rising and interest rate hikes looking likely, this will provide a greater boost to bank earnings going forwards. Yet RBC think growing challenges elsewhere could outweigh these benefits.

Put simply, the high street banks are coming under increasing threat from challengers and building societies. Lloyds relies heavily on customer deposits for lending, and with competition in the savings market rising, its margins face a squeeze if it has to borrow more expensive wholesale money to fund future lending.

Here’s what I’m doing

It could well prove that these fears are overblown, and that the boost to Lloyds’ profits from higher interest rates outweighs those competitive pressures. It’s certainly possible that the Bank of England supercharges rates in the coming months to curb inflation, providing even greater support.

Yet despite this, I’m not considering buying Lloyds shares for my own portfolio. And it’s not just due to the threats highlighted by RBC.

Though the broader UK economy is performing better than expected, the housing market slowdown is accelerating. And if interest rates rise the downturn could intensify, impacting a key source of earnings for Lloyds as Britain’s biggest mortgage provider.

Furthermore, while rising interest rates are boosting Lloyds’ NIMs, they’re also threatening to choke off loan growth and drive up impairments. Finally, there’s the possibility of a bank tax being introduced at this month’s Autumn Budget, which could also take a big bite out of profits and, by extension, dividends.

A better FTSE 100 stock?

On balance, the threats to Lloyds’ share price are too high for my liking. And like RBC, I think the outlook could be deteriorating for the FTSE 100 bank. I’d rather find other stocks to buy today, like the dividend hero described in the free wealth report below.

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