UBS continues to see Lloyds Banking Group (LON:LLOY) as a ‘buy,’ arguing that the lender is trading at a 13-17-percent discount to a sector trading at the highest implied cost of equity since mid-2016, Proactive Investors reports. The comments came after the bailed-out lender moved to offload its remaining stake in Standard Life Aberdeen (LON:ADN) last week.
Lloyds’ share price rose in the previous session, adding 0.27 percent to close at 63.17p, outperforming the broader UK market, with the benchmark FTSE 100 index shedding 0.43 percent to 7,703.81 points. The group’s shares have lost more than eight percent of their value over the past year, as compared with about a 2.6-percent gain in the Footsie.
UBS sees Lloyds as ‘buy’
UBS reaffirmed Lloyds as a ‘buy’ yesterday, in a review of UK banks, focusing on ring-fencing rules due to come into force next year, which will have an impact on the sector. Proactive Investors quoted the analysts as explaining in a note to clients that UK domestic banks have not been “immune to weak Eurobank sentiment with a more cautious rate outlook compounded by Brexit uncertainty”. As a result, this had left Lloyds and FTSE 100 peer Barclays (LON:BARC) trading at a 13-17-percent discount to a sector trading at the highest implied cost of equity since mid-2016 when some thought the European Central Bank might cut rates.
The analysts further pointed out that they thought the impact of the bailed-out lender’s “management 2020 ambition of growing loans by high single digits is already in place, that the market fears Lloyds’ margin decline too much, and recommend buying the stock”.
Other analysts on lender
Goldman Sachs, which sees Lloyds as a ‘sell,’ set a price target on Lloyds of 58p this week. According to MarketBeat, the bailed-out lender currently has a consensus ‘hold’ rating and an average price target of 75.45p.