Lloyds Banking Group PLC (LSE:LLOY) and HSBC Holdings PLC (LSE:HSBA) are coping with current macroeconomic challenges according to analysts at broker Berenberg, who met recently with banks across Europe.
Three consistent messages came out from the meetings, firstly the banks are enjoying more material benefits from rising interest rates; volumes have started to slow but there has not yet been any deterioration in credit quality.
On the basis of the responses, the Berenberg analysts said they still like the European banking sector overall.
In the UK, they noted that Lloyds said refinancing volumes are offsetting the impact of the gilt market disruption in October, though pricing has been competitive. Meanwhile, deposit flows into higher-yield accounts also remain low for now.
They said HSBC noted that global recessions tend to lead to slowing loan growth in China - rather than material loan losses. Covid uncertainty might also start to unwind going forward. while “rest of Asia” lending is currently growing at a double-digit rate.
'Hold' both Lloyds (target price 55p) and HSBC (target 625p) shares is the Berenberg analysts’ view.
Lloyds today was up 1% at 48.6p and HSBC ahead 2.3% at 582.7p.