Analysts at Morgan Stanley see Lloyds Banking Group (LON:LLOY) as the most profitable bank in the UK and one of the most profitable in Europe with top quartile shareholder return, Proactive Investors reports. The comments came as the analysts reaffirmed the bailed-out lender as an ‘overweight,’ while lowering their target for the Lloyds’ share price to reflect a drop in earnings forecasts.
The London-listed company’s shares inched lower in the previous session, giving up 0.14 percent to close at 57.81p, underperforming the broader UK market, with the benchmark FTSE 100 index ending trading 0.08 percent higher at 7,220.22 points. Lloyds’ shares have been little changed this morning, and stood at 57.81p as of 08:19 BST, flat in percentage terms.
MS trims target on Lloyds share price
Morgan Stanley reaffirmed Lloyds as a ‘top pick’ yesterday, while trimming its valuation on the lender’s shares from 78p to 70p to reflect a two-percent drop in its forecasts for earnings in 2020 and 2021. Proactive Investors quoted the broker as saying in a note on UK banks that the bailed-out lender’s valuation was ‘compelling’.
The broker continues to expect a £2.5-billion share buyback to be announced at year end, driving a total yield on the stock of 12 percent. Morgan Stanley further commented that while the biggest uncertainty for Lloyds was asset quality but its numbers already account for a significant slowdown.
Other analysts on bailed-out lender
Davy Research lifted its rating on the FTSE 100 lender to ‘outperform’ last week, without specifying a target on the Lloyds share price. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating and an average valuation of 71.38p.
Analysts at Bank of America Merrill Lynch commented last month that it expects the FTSE 100 group to see a £2-billion revenue headwind related to mortgages.