Lloyds share price subdued as investors await stress test results

Credit Suisse expects lender to pass health check

Lloyds share price subdued as investors await stress test results

Shares in Lloyds Banking Group (LON:LLOY) have lost ground in London today, with investors awaiting the outcome of the Bank of England’s (BoE) stress test tomorrow. Analysts at Credit Suisse expect the bailed-out lender to pass the health check despite an estimated 100 basis point loss from its consumer loan book.

As of 13:18 GMT, Lloyds’ share price had given up 0.88 percent to 65.51p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.17 percent lower at 7,396.84 points. The group’s shares have added more than 11 percent to their value over the past year, and are up by some four percent in the year-to-date.

Credit Suisse upbeat on Lloyds

BoE is scheduled to unveil the results from its latest health check of UK banks tomorrow and Proactive Investors reports that Credit Suisse expects Lloyds to pass the test even with an estimated 100 basis point loss from its consumer loan book, including the recently acquired credit card business MBNA.

The key takeaway for the lender, however, will be the extent to which a net drawdown implies a Pillar 2B capital requirement to ensure it has adequate capital to manage risks, and the analysts estimate that the group’s end-state minimum common tier equity 1 (CET1) ratio requirement is 13.2 percent, including 3.4 percent available to absorb stress losses.

“Were the net drawdown to be significantly above 3.4 percent this could put pressure on our 13.5 percent assumption,” Credit Suisse pointed out, as quoted by Proactive Investors.

Last week, analysts at JPMorgan said that Lloyds was best positioned to manage higher capital requirements.

Analysts remain bullish

The comments came as Credit Suisse reaffirmed their ‘outperform’ rating on Lloyds today, valuing the shares at 80p. According to MarketBeat, the bailed-out lender currently has a consensus ‘hold’ rating and an average price target of 72.41p. 

As of 13:52 GMT, Monday, 27 November, Lloyds Banking Group share price is 65.53p.

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