In recent months, Lloyds has been battling weaker revenues caused by a combination of lower rates, lower card balances, and a waiving of overdraft fees.
Revenues should now stabilise believes Goldman, but the focus is set to switch now to the impact from the credit cycle and in particular a potential doubling of UK unemployment and the end of a number of key coronavirus financial support measures.
As a result, defaults are likely to rise markedly, suggests Goldman.
Lloyds has relatively the largest consumer book among large-cap UK banks and significant small company exposure, while macro risks such as Brexit and negative interest rates pose additional uncertainties.
Goldman has lowered its earnings per share estimates over the new four years by 3-7% due to these uncertainties, while its target price drops to 27p.
That gives little upside potential and makes Lloyds a sell, concludes the US bank.
Shares fell 1.7% to 26p.