Lloyds Banking Group PLC best option among UK banks post Covid-19, says broker
Barclays has an ‘overweight’ rating on Lloyds, with a new CEO also possibly instigating strategic action to boost returns.
PLC () is still the best value of the UK banks but further progress for the sector overall hinges on post Covid-19 expectations, suggest Barclays.
Analysts at the bank have posed three questions for each of UK banks post-Covid-19 based on interest rate sensitivity; asset quality and earnings recovery.
On these three issues, Lloyds (share price target 46p) comes out best, suggests Barclays.
The questions it poses fo the Lloyds bosses are: Can net interest margins and operating income move up again; will there be any provision write-backs and if so potential capital hand-outs and will its tax rate rise after the Budget given that 15-20% of the business is non-banking.
Seemingly answering its own questions, Barclays has an ‘overweight’ rating on Lloyds, with a new CEO also possibly instigating strategic action to boost returns.
Elsewhere, Natwest Group () is rated as ‘neutral’ (target 180p) with a trade-off between subdued earnings/returns and attractive medium-term capital return prospects.
PLC () is rated as ‘underweight’ (440p) as Barclays sees a challenging outlook near term for revenues and a rich valuation on ten times 2023 earnings.
Among the challenger banks, Virgin Money PLC ( 170p target) and One Savings Bank PLC ( 500p) are rated ‘overweight’ while PLC (LONN:MTRO 130p) is ‘underweight’.
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