Lloyds (LSE: LLOY) shares have defied my expectations in 2025. At the start of the year – when they were trading near 55p – I thought they’d struggle to break clear of 60p this year. Instead, they’ve surged to 76p. That means anyone who stuck £10,000 on the bank stock at the start of the year is now sitting on about £13,800 (not including dividends).

So, what’s been driving these gains? And are the shares worth considering today?

Why the shares are on fire

There are a few reasons Lloyds shares are doing well in 2025.

One is that UK interest rates are coming down. While higher rates are generally better for banks, a drop in rates can also be good as it can spur lending and refinancing activity. Lower interest rates also make dividend stocks more attractive. Lloyds currently has a dividend yield of about 4.6% – a higher number than your average high-interest savings account pays.

Another reason the stock has jumped is that institutional capital has flowed from the US to Europe this year. This has benefitted a range of companies but banks (the third-largest sector in the Stoxx Europe 600 index) have really prospered. Across Europe, a lot of bank stocks have produced double-digit gains in 2025. It’s worth noting that Santander is up about 70% year to date – miles ahead of Lloyds.

Additionally, there’s been a bit of a broadening out of the market in 2025. The ‘Magnificent 7’ trade – which a lot of investors have piled into in recent years – hasn’t worked so well this year. As a result, investors have looked for other opportunities. Banks, with their low valuations, attractive dividend yields, and share buybacks, have benefitted.

Finally, company-specific news has been quite encouraging. In February, Lloyds raised its dividend by a healthy 15%. It also announced a £1.7bn buyback. This activity led to multiple price target hikes.

Worth a look today?

Are the shares worth a look today? Hmmm.

The share price trend is up, the valuation is still quite low (the forward-looking price-to-earnings (P/E) ratio is eight using the earnings forecast for next year), and the dividend yield is attractive. Given this combination of momentum, value, and income, there could be further gains on the cards.

That said, a weak UK economy is a risk here. If there was an economic downturn, loan defaults could rise, putting pressure on profits and the share price. It’s worth noting that unlike banks such as HSBC and Barclays, Lloyds isn’t geographically diversified. Ultimately, this stock is a play on the UK economy.

One other issue worth highlighting is that Lloyds shares don’t have a great long-term track record. Believe it or not, over the last 10 years, the stock has gone backwards. Given this track record, and the fact that UK banking isn’t really a growth industry, there could be better shares to consider buying for the long run. In my view, a lot of other stocks have more potential over the next five to 10 years.