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Broker round-up: Lloyds Banking, RBS, HSBC, Fresnillo, 888


It was mixed news for a cash-strapped chancellor today as he prepares to unveil his latest spending cuts on the country.

On the plus side, analysts at Deutsche Bank have upgraded the target price for state-controlled Lloyds Banking Group (LON:LLOY) to 72p from 64p.

A price of 72p, it is currently 61.3p, would mean a handy profit on the government’s 39% stake if George Osborne could arrange its disposal.

He made it clear in the recent Mansion House speech that the government wants to sell and there must be a good chance of success if Deutsche Bank’s views are a guide

Lloyds Banking (LBG) is the German broker’s top pick in the sector. 

“We think LBG is in the early stages of cost rationalisation, enjoying good margin expansion and considerable success in building capital," said analysts Jason Napier and David Lock.

The outlook, though, is not so good for the 80% taxpayer-owned Royal Bank of Scotland (LON:RBS).  The broker believes it is set to remain a millstone and underperform the other banks with a lot of uncertainty ahead. ‘Sell’ is Deutsche’s view.

The other big change opinion was an upgrade for HSBC to ‘buy’. 

The current HSBC (LON:HSBA) share price presents a good opportunity, said Deutsche, with investors getting a strong balance sheet, some gearing to a continued US recovery and a strong dividend yield buttressed by plans for buybacks in 2014 and beyond.

Barclays (LON:BARC) stays a ‘buy’ and Standard Chartered (LON:STAN) is a ‘hold’ ahead of a trading update.

Elsewhere, Investec is mystified by the share price decline of online gaming firm 888 (LON:888) over the last month, as it bears no relation to trading patterns, nor does it take account of growth opportunities in the US.

“The group is trading well into the H1 period-end, we believe, and we expect the group to meet our unchanged FY13E estimates. 

With projected strong free cash flow in Europe supporting a solid dividend yield, we see the US opportunity as offering tangible upside and we reiterate our ‘buy’ and 185p discounted cash flow-based price target,” Investec’s James Hollins said.

It is time to stop selling Mexican precious metal miner Fresnillo (LON:FRES), according to Citigroup.

Fresnillo shares have now reached the investment bank’s target after a sharp fall, and as a result Citi gave the silver miner an upgrade, of sorts, changing its rating from ‘sell’ to ‘neutral’.

Citi set a new price target of £10.16 (current price £9.02).

“While the gold and silver price fall should have impacted FRES the least because of its low cost structure, it fell sharply,” analyst Jon Bergtheil said in a note.

“We believe this fall was based on its previous apparent over-valuation (helped by a limited free float) and on the exit of the type of portfolio investor who simply used it as a proxy-exposure to the silver price, irrespective of valuation.”

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