A few FTSE 100 favourites have fallen back a bit in the past few months, and that includes Lloyds Banking Group (LSE: LLOY) shares. Since a five-year peak of 123p in August, the price has dropped 19% as I write, to 100p.

Does that give us a new buying opportunity? I think it just might, and a number of City analysts think so too. In recent updates, Morgan Stanley and Bank of America issued 140p targets — for a potential 40% rise. And not far behind them, Goldman Sachs and UBS suggest a rise to 133p. Let’s dig in and see if these hopes are realistic…

How’s business?

At the first-half stage, after “successfully completing our 2022 to 2026 strategy,” here’s what the boss said about the bank’s new ‘Accelerate 2030’ plan…

We will accelerate through reimagined customer experiences, increased Group connectivity, and a productivity step-change, all enabled by pioneering technology. Our strategy will allow us to unlock the next phase of growth and sustainable value creation for our shareholders.

CEO Charlie Nunn, July 2026

Having a snappy strategy name and aiming for a new “phase of growth and sustainable value creation” are all well and good. But there are numbers behind these lofty-sounding goals…

The next phase

Following expectations for underlying net interest income of greater than £14.9bn in 2026, management pins the next few years on a number of targets. They include…

• Compound annual growth in net income in mid-single-digits.
• Return on tangible equity greater than 18% in 2028, reaching around 20% by 2030.
• Capital generation of greater than 225 basis points in 2030.
• Pro forma CET1 ratio of approximately 13%.

Falling interest rates (when it finally happens) could potentially push down bank net interest. And that’s a genuine concern, which I expect will weigh on analyst forecasts. But if Lloyds can achieve the desired progress in the next four years, there might not be too much to worry about.

Still, we do face one additional worry this month, and that’s a potential hit to banks in the 28 October Budget. Reports suggest Chancellor John Healey could hike the bank corporation tax surcharge. And that could dent Lloyds’ profits — and hit the share price.

Optimism meets valuation

The question for me is whether the valuation is attractive. We’re looking at a forward price-to-earnings (P/E) ratio of 10 for 2026. And there’s a good argument that this is about right for a UK high street bank, especially in weaker economic times.

But subsequent forecasts would drop the P/E to only around seven by 2028. A figure like that might not be as low as banking crash levels of 2008. But it’s definitely heading in that direction. And if predictions turn out to be accurate, it would put Lloyds firmly in the undervalued category, I feel.

For me, Lloyds remains a potential cornerstone for a long-term Stocks and Shares ISA. I reckon investors should consider it, along with a number of other UK stocks that look seriously tempting…

Should you invest £5,000 in Lloyds Banking Group Plc right now?

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Alan Oscroft owns shares in Lloyds Banking Group.