Lloyds Banking Group is among the day’s biggest risers in the FTSE 100 on hopes it would get a bounce if the UK votes to remain in the EU, as well as forecasts of a better than expected outlook.
Lloyds shares are up 1.12p at 70.76p after a buy note from analyst Ian Gordon at Investec, who edged up his target price from 78p to 79p and said:
Lloyds has, by and large, traded sideways since the brief euphoria which greeted its declaration of a 2.75p dividend against 0.8p of earnings in 2015. Looking ahead, (1) we expect Lloyds, and Royal Bank of Scotland (buy), to enjoy the strongest “Bremain bounce” on 24 June, (2) we anticipate a slightly “better than expected” second quarter estimated 2016 outturn assisted by “less bad” Other income, a year on year decline in the Financial Services Compensation Scheme charge, and lower net negative exceptionals while (3) proximity of anticipated dividend progression offers further support. Buy.
Although we see superior value in the challenger bank space, Lloyds is now our preferred FTSE 100 bank, offering a 2018 estimated prospective dividend yield of 8.6%. Aside from this support, we regard its rating of 1.1 times 2018 estimated total net asset value for a 2018 estimated return on total equity of 12.2% as undemanding.
