Lloyds: Upgrades across the board; but just how much are the shares worth?


There were upgrades across the board for Lloyds Banking Group PLC (LON:LLOY) following its first-quarter update Wednesday, which smashed expectations.

While much of the upside in the numbers came from the write-back of previously taken provisions, there was enough there (particularly around the net interest margin) to buoy sentiment.

JP Morgan Cazenove, for example, increased its price target to 54p a share from 51p, while maintaining its ‘overweight’ stance.

“We continue to see top-line recovery ahead of market expectations alongside best-in-class efficiency ratios,” it said in a note to clients.

Credit Suisse upped its valuation to 54p too, but from 50p, as did Deutsche Bank. Both have positive calls on the stock (respectively ‘outperform’ and ‘buy’).

Scale winner 

Credit Suisse in an earlier, in-depth note predicted Lloyds could become a “scale winner” in the banking sector.

“We see gathering evidence of that from the first-quarter results,” it added in Thursday’s update.

“NIM [net interest margin] is improving faster than we were expecting and the confident tone on loan growth gives us confidence that mortgage market share trends may have inflected positively.”

Credit Suisse also increased its above-consensus statutory profit estimates by 15% for 2021 and 6% for both 2022 and 2023.

On Wednesday Lloyd’s posted first-quarter numbers that came in well ahead of forecasts and impressed market commentators.

Antonio’s swansong 

It was chief executive Antonio Horta-Osorio’s last update before he heads off to chair Credit Suisse and the consensus was he is leaving on a high note.

Profits were £1.9bn helped by a sizeable write-back of bad debts, but Russ Mould, investment director at AJ Bell, added: “Net interest margin (NIM) is better than expected, being the difference between what it earns from interest charged on loans and interest paid on savings deposits.

“Costs are also better than expected, which might come as a surprise given how difficult it is to streamline a business the size and complexity as Lloyds.”


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