Jefferies remains bullish on Lloyds Banking Group (LON:LLOY), pointing to the potential for the UK bulk annuity market to boost the group’s earnings through its Scottish Widows insurance business, Citywire reports. The comments come as investors prepare for the bailed-out lender’s full-year results and strategic update due out on February 21.
Lloyds’ share price rose in the previous session, adding 0.41 percent to close at 71.55p, outperforming the broader UK market, with the benchmark FTSE 100 index closing 0.08 percent higher at 7,671.53 points. The group’s shares have added just under 10 percent to their value over the past year, as compared with a near-seven percent rise in the Footsie.
Jefferies upbeat on Lloyds
Jefferies reiterated its ‘buy’ rating on Lloyds yesterday, with a price target of 91p on the shares.
“Investors are keen to hear more about Lloyds’ insurance business,” the broker’s analyst Joseph Dickerson explained, as quoted by Citywire, adding that Jefferies had “researched the opportunity in UK bulk annuities and conclude that the secular growth opportunity warrants capital allocation”.
Scottish Widows prospects
Dickerson further elaborated that if the FTSE 100 lender’s Scottish Widows unit could achieve the group’s natural market share in other products, there was about a six-percent uplift to Lloyds’ earnings per share and £3 billion of value creation over five years. He added that the banking backdrop remained ‘supportive’.
Jefferies’ upbeat comments come after Deutsche Bank reaffirmed its bullish stance on Lloyds this month, while hiking its price target on the shares, expecting the lender’s margins to rise to around 287 basis points in the current year and flagging a rise in capital returns.
According to MarketBeat, the bailed-out lender currently has a consensus ‘hold’ rating and an average price target of 75.31p.