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What’s next for Lloyds shares after solid earnings?


MongiIG

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The UK’s third most valuable bank received stock target price upgrades from Credit Suisse, JPMorgan and UBS analysts.

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  • Lloyds Banking Group (LON: LLOY) shares have fallen 1.9% since reporting H1 results
  • Nevertheless, a trio of research firms are now eyeing higher target prices
  • The group reported a statutory profit before tax of £3.9 billion for the period, up from a loss of £0.6 billion
  • It also reintroduced a ‘progressive and sustainable ordinary dividend policy’
  • Interested in trading LLOY shares? Open an account with us to get started.

LLOY stock price: what are analysts’ latest targets?

Credit Suisse, JPMorgan and UBS analysts raised their target prices on Lloyds shares, following the bank’s latest earnings update.

The FTSE 100 money lender was named as Credit Suisse analyst Omar Keenan’s top UK stock pick last week.

He maintained an ‘outperform’ call on the stock and lifted the price target on LLOY to £61 from £60 a share, on the back of higher revised earnings for the rest of 2021, 2022 and 2023.

‘Repayment rates remain higher than average and travel spend is yet to return, so we would expect improvements in sequential trends with further lifting of restrictions,’ the analyst said, adding that the banking sector continues to look ‘attractive’ as a whole.

UBS also raised its price target to £55 from £54 previously alongside a ‘buy’ rating, while JPMorgan, which continues to recommend ‘outperform’, is now eyeing a fair value estimate of £60, up from £59 before.

Lloyds currently has a mean consensus of ‘buy’ from 25 analysts and average target price of £53.23, according to the latest S&P Global Market Intelligence data.

The target price equates to a potential 14.3% upside from the stock’s most recent price of £46.59 on Wednesday.

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How did Lloyds fare in its H1 2021 results?

Last Thursday, the group reported a statutory profit before tax of £3.9 billion, a significant increase from the £0.6 billion loss during the same period a year ago.

The group attributed this to ‘solid business momentum’ and a net impairment credit of £333 million in the second quarter alone.

Net income came in 2% higher year-on-year and slightly ahead of analyst expectations at £7.6 billion.

This was alongside increased average interest-earning assets of £441 billion, a ‘strong’ banking net interest margin of 2.5% and other income of £2.4 billion.

The board also reintroduced what it called a ‘progressive and sustainable ordinary dividend policy’ as it announced an interim ordinary dividend of 0.67 pence per share.

This was ‘given the strength of the capital position and the regulator’s clarification that banks may resume capital distributions’.

Subsequently, Lloyds was able to hit a CET1 ratio of 16.7% after dividend accrual, which is ‘significantly ahead’ of both the ongoing target of around 12.5% and regulatory requirement of 11%.

The group enhanced its guidance for the rest of 2021 on the back of these results. It now expects net interest margin to be around 250 basis points and operating costs to be at an estimated £7.6 billion for the full year.

 

Kelvin Ong | Financial writer, Singapore | Publication date: Wednesday 04 August 2021. IG

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