Lloyds’ share price beat all FTSE 100 banks in August — but 2 FTSE 250 peers are still ahead

Up 5.17%, the Lloyds share value has finished nicely this month, beating out all the opposite main UK banks together with NatWest, Barclays and HSBC. As Britain’s greatest retail financial institution, Lloyds is usually seen because the bellwether of the sector. 

However whereas it’s led the FTSE 100 pack, two regional FTSE 250 gamers are literally forward.

Shut Brothers Group’s (LSE: CBG) jumped 17.73% this month, whereas Paragon Banking Group‘s (LSE: PAG) up 5.95% (as of 28 August).

That begs the query: do these smaller lenders supply the identical long-term worth as Lloyds? I made a decision to take a better look.

Flying too near the solar

Shut Brothers has been probably the most outstanding performers of 2025, with its share value virtually doubling year-to-date. The specialist monetary providers group offers lending, securities buying and selling and funding administration options throughout a spread of sectors.

A lot of the latest rally got here after the Supreme Courtroom overturned earlier rulings on automobile mortgage gross sales practices. That call lifted a cloud hanging over a number of banks – Lloyds included – and helped spark investor enthusiasm.

However right here’s the catch: regardless of its hovering share value, Shut Brothers continues to be unprofitable. Its newest outcomes confirmed it swung to a lack of £102.4m, representing a 172% decline. That raises questions on how sustainable the rally actually is.

To be truthful, the inventory does look low-cost on paper, buying and selling on a ahead price-to-earnings (P/E) ratio of 8.2 and a price-to-book (P/B) ratio of simply 0.47. But some analysts consider the excellent news is already priced in. RBC Capital Markets not too long ago downgraded the inventory to Sector Carry out, protecting its value goal at 525p.

The danger, in my opinion, is that Shut Brothers might battle to justify the latest surge if profitability doesn’t observe.

A dependable earnings inventory

Paragon Banking Group, however, provides a steadier story. Recognized for its give attention to specialist mortgages, client loans, and buy-to-let lending, the financial institution has constructed a fame as a reliable dividend payer. It at present yields 4.6%, backed by a 20-year historical past of funds and a payout ratio of round 40%.

Valuation seems to be undemanding too, with a ahead P/E ratio of 8.6 and a P/B ratio of 1.2. Importantly, Paragon’s worthwhile – it boasts a 21.5% working margin and a return on fairness (ROE) of 14.7%. In its Q3 buying and selling replace, mortgage balances rose 4.8%, underlining regular enterprise development.

Dealer sentiment stays cautious however constructive. On 26 August, Jefferies issued a Maintain ranking with a goal of 1,015p, whereas the broader analyst consensus sits at round 1,000p – implying a possible 12% improve from at present’s value.

My verdict

Regardless of outperforming Lloyds this month, Shut Brothers has nonetheless shed 58% of its worth over the previous 5 years. This 12 months’s restoration has rewarded shareholders handsomely, however with little to again a long-term thesis, I wouldn’t contemplate the inventory.

Paragon nevertheless, seems to be extra engaging. For earnings traders looking for a dependable and pretty valued alternative, it looks like a inventory value contemplating. Lloyds might stay the UK banking heavyweight however, on stability, I believe Paragon deserves a spot on any watchlist.