Goldman Sachs remains bearish on Lloyds Banking Group (LON:LLOY), arguing that capital requirements might impact dividend growth. The comments follow the recent results from the Bank of England’s (BoE) latest stress test.
Lloyds’ share price closed marginally lower in London in the previous session, shedding 0.35 percent to 65.15p, marginally underperforming the broader UK market, with the benchmark FTSE 100 index falling 0.16 percent to close at 7,327.50 points. The group’s shares have added more than 12 percent to their value this year, as compared with about an 8.6-percent rise in the Footsie.
Goldman Sachs bearish on Lloyds
Goldman Sachs reiterated its ‘sell’ rating on Lloyds yesterday, and trimmed its price target on the shares by four percent to 53p, arguing that the lender is facing pressure to strengthen its capital buffers, which could impact its potential for growth in dividend payments. Proactive Investors quoted the analysts as explaining further that investors seem “increasingly focused on whether the group will be permitted to continue operating in line with its current target capital level”.
The comments follow the BoE stress test which showed that Lloyds’ capital position remains above its CET1 ratio hurdle rate of 7.5 percent and Tier 1 leverage ratio hurdle rate of 3.25 percent in the hypothetical stress scenario with a low point of 7.9 percent CET1 ratio and 3.9 percent leverage ratio in 2018 after ‘strategic’ management actions.
Other analysts on UK lender
Citigroup reiterated its ‘sell’ rating on Lloyds last week, without specifying a price target on the stock, while JPMorgan Chase & Co, which sees the bailed-out lender as a ‘buy,’ set a valuation of 85p on the shares. According to MarketBeat, the FTSE 100 company currently has a consensus ‘hold’ rating and an average price target of 71.75p.