Lloyds Banking Group (LSE: LLOY) has witnessed an impressive surge in its share price over the past year, rising from 47p to 72p—a remarkable 53% increase. With strong financial momentum and shareholder-friendly initiatives, the stock remains attractive. However, as fintech disruptors like Wise (LSE: WISE) gain traction, could they offer superior long-term returns compared to Lloyds?
Lloyds’ Strong Performance and Growth Potential
Lloyds benefits from several key factors that bolster its growth:
- Rising Profits – Analysts predict earnings per share (EPS) will rise from 6.3p in 2024 to 7.1p in 2025 and 9.1p in 2026, indicating a strong earnings trajectory.
- Attractive Dividend Growth – The bank recently boosted its total dividend by 15% to 3.17p per share for 2024, yielding an attractive 4.4%—better than most savings accounts.
- Aggressive Share Buybacks – Lloyds has committed £1.7bn to buybacks, potentially increasing EPS and supporting further share price appreciation.
- Bullish Market Trend – The stock continues its strong upward trajectory, with momentum often persisting longer than expected.
Despite these positives, Lloyds’ performance is closely tied to the UK economy. With slow economic growth and uncertainties ahead, its future gains may be limited compared to high-growth opportunities elsewhere.
Why Wise Could Outperform Lloyds
For investors seeking higher long-term returns, Wise (LSE: WISE) presents a compelling alternative. As a leading global fintech specializing in international money transfers, Wise operates in over 70 countries and remains independent of the UK economy.
Key Reasons Wise Could Deliver Higher Returns:
- Global Scalability – Unlike Lloyds, which operates mainly in the UK, Wise has immense global expansion potential, tapping into new markets with innovative financial products.
- Fintech Disruption – The financial industry is rapidly shifting toward digital banking and fintech services. Traditional banks like Lloyds face challenges from tech-driven firms like Wise, which offer lower fees and faster transactions.
- Market Share Gains – Wise’s efficient international payment solutions give it an edge over legacy banks like Lloyds, whose cross-border offerings are costlier and less effective.
- Revenue and Earnings Growth – Wise’s scalable business model supports higher earnings potential than Lloyds. Despite a P/E ratio of 28, its robust revenue growth could justify long-term valuation gains.
Which Stock Is the Better Buy?
While Lloyds provides steady income and recent momentum, its growth potential is constrained by the UK’s economic conditions. Wise, however, is positioned for significant expansion in the fintech sector, making it an attractive choice for long-term investors seeking substantial returns. With digital banking on the rise, Wise could emerge as a dominant force in the financial industry.
