Deutsche Bank Upgrades Lloyds Banking Group (LYG) to Buy; Short-Term Weakness, But Don't Miss Value Opportunity

June 8, 2009 7:56 AM EDT

Deutsche Bank upgrades Lloyds Banking Group (NYSE: LYG) from Sell to Buy. Price target increased from 35p to 100p.

Deutsche analyst says, "We expect LBG to post extremely weak 1H09 earnings driven by sharply lower interest margins and elevated loan losses. Tangible NAV will fall materially from 124p as these losses, and those we forecast for 2009 and 2010 are reported. Regulatory risk is substantial with the EU yet to sign off on government capital injections and the APS, and likely in our view to impose behavioural limits and potentially asset sales too. But, we believe the group is capable of 9p of post-crisis earnings whilst interest rates remain low, rising to 15p as net interest margins recover as loans reprice to wider spreads, deposit spreads improve and wholesale repricing completes...Given rebuilt capital ratios and government reinsurance of a substantial portion of the loan book we believe an earnings-based approach is warranted. Our 100p target price is based on a fair multiple of 6.5x fully recovered EPS of 16p."

To see more analyst ratings on LYG Click Here.

Lloyds Banking Group plc, formerly Lloyds TSB Group plc, is a United Kingdom-based financial services group providing a range of banking and financial services, primarily in the United Kingdom, to personal and corporate customers.

Related Categories

Upgrades

Stocks Mentioned

Related Entities

• Deutsche Bank
• UBS

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?