Lloyds share price: UBS trims valuation on lender

Analysts nevertheless remain bullish on stock with ‘buy’ rating

Lloyds share price: UBS trims valuation on lender

UBS has trimmed its price target on Lloyds Banking Group (LON:LLOY), while reaffirming its ‘buy’ rating on the bailed-out lender in the wake of the FTSE 100 group’s interims. Proactive Investors reports that the analysts have pointed to lowered peer group trading multiples in its sum-of-the-parts valuation.

Lloyds’ share price has fallen into negative territory in today’s session, having given up 0.32 percent to 62.35p as of 13:39 BST. The stock is marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.12 percent lower at 7,650.15 points. The group’s shares have lost nearly seven percent of their value over the past year, as compared with about a two-percent gain in the Footsie.

UBS trims Lloyds’ price target

UBS lowered its price target on Lloyds from 87p to 80p, while maintaining its ‘buy’ rating on the shares, in the wake of the group’s results last week. Proactive Investors quoted the analysts as saying that the FTSE 100 lender’s net interest income was in line with estimates and other operating income, lease depreciation, operating costs and impairments were all better than expected.

“Higher first-half earnings and reinforced margin guidance see our near-term earnings per share estimates upgraded by 3-5%,” the broker elaborated, adding, however, that the higher estimates were offset by lowered peer group trading multiples in its sum-of-the-parts valuation.

Addressing market concerns

UBS, however, noted that one of the promising areas in Lloyds’ results was the bank’s move to address market concerns including the sustainability of mortgage margins, structural hedge returns and capitalisation of investment costs.

“With the lion's share of the upside we see for the stock driven by valuation we think adding new facts to the debate – and keeping them updated – is an important and positive move,” the analysts concluded, as quoted by Proactive Investors.

As of 14:04 BST, Monday, 06 August, Lloyds Banking Group share price is 62.37p.

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