Lloyds Banking Group PLC still has value despite weak outlook, says UBS
With 50% upside potential and decent prospects for returning to paying dividends, it is still a buy says the broker.
PLC () is still rated a ‘buy’ by analysts at UBS even though it has reduced its price target to 40p.
The Swiss broker has slashed its estimates for 2021-2023 by 25% but sees potential for these to be revised back up especially if the bank can hit its 8% return on equity target.
“The outlook for net interest income and for capital management is key to delivering more upside than we forecast,” says UBS.
With 50% upside potential and decent prospects for returning to paying dividends, it is still a buy says the broker.
Lloyds posted a loss for the first half of the year as it bumped up its provision for bad loans to reflect what it said was a significant deterioration in the economic outlook under the impact of the coronavirus pandemic.
The FTSE 100-listed lender hiked its impairment charge to £3.8bn, including £2.4bn in the second quarter to June 30, 2020.
Its loan books continue to perform well, based on actual defaults to date, the bank said, but the additional provisions were about “building balance sheet resilience” on top of a CET1 capital ratio of 14.6%.
Shares rose 0.5% to 28.02p.
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