Lloyds share price: Credit Suisse flags potential £1bn buyback

Analysts remain bullish on bailed-out lender

Lloyds share price: Credit Suisse flags potential £1bn buyback

Credit Suisse remains bullish on Lloyds Banking Group (LON:LLOY), flagging a robust fourth quarter performance, a confident outlook and a share buyback at its full year results later this month, Proactive Investors reports. The news comes after earlier this week analysts at Jefferies pointed to the potential for the UK bulk annuity market to boost the group’s earnings through its Scottish Widows insurance business.

Lloyds’ share price, however, fell last night, shedding 1.43 percent to 69.51p. The stock underperformed the broader UK market, with the benchmark FTSE 100 index shedding 54.43 points to end trading 0.72 percent lower at 7,533.55. This morning, the shares have jumped 1.19 percent to 70.34p as of 08:03 GMT.

Credit Suisse hikes price target

Credit Suisse reiterated its ‘outperform’ stance on Lloyds yesterday, hiking its price target on the shares from 80p to 85p ahead of the blue-chip lender’s results on February 21 when the company will also update investors on its strategy. Proactive Investors reports that the analysts now expect the company to unveil a £1-billion buyback instead of a 1.5p special dividend for 2017, as previously anticipated. 

Credit Suisse estimates that Lloyds could return £15 billion or 30 percent of its market capitalisation between 2018 and 2020, relative to a common equity tier 1 ratio – a measure of capital strength – of 14 percent.

Group to tweak ROTE target

The broker further expects Lloyds to tweak its return on tangible equity (ROTE) target for 2019, from between 13.5 percent to 15 percent, based on a CET1 ratio of 13 percent, to around 14 percent following its performance in the recent Bank of England stress tests.

In terms of risks, Proactive Investors quoted Credit Suisse as pointing to higher capital requirements, a weaker UK economy as well as Brexit-related uncertainty.

As of 08:02 GMT, Thursday, 01 February, Lloyds Banking Group share price is 70.34p.

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