Lloyds Banking Group PLC (LSE:LLOY) analysts have ramped up their forecasts for share buybacks from the lender this year ahead of the sector’s full-year results season next month.
Since the high street banks published their third-quarter statements in the autumn, analysts have been making big adjustments to their expectations for the outcome for the full-year, as well as for results in 2023, 2024 and beyond.
Share buybacks expectations for Lloyds this coming year and next have been hiked by 17% and 12% respectively to £1.8bn in each year, analysts at Jefferies noted.
For 2022, Lloyds is predicted to announce another £2.0bn share buyback when it reports results on 22 February, the same as announced a year ago, as well as hiking its total dividend 20% to 2.4p per share.
The City consensus is for 2022 results to show statutory profit before tax inch up to £7.2bn from £6.9bn a year ago, as net interest income rises to £13.1bn from £11.2bn a year earlier and net interest margin (NIM) should come in at 2.92%, up from 2.54% a year ago thanks in large part to rising interest rates from the Bank of England.
In a note to clients on Thursday, the Jefferies analysts said much of the hikes to shareholder return predictions by other firms in the Square Mile seem to be based on a shift upwards in net interest income, though credit cost assumptions are rather “draconian”, with costs seen rising 20% for 2023.
“For 2024, our earnings estimates are 28% higher than consensus with around 60% of the variance explained by net interest income which is 8% higher as we believe the consensus fails to embed the outer year effects of structural hedge maturities onto higher rates,” said the Jefferies analysts.
Lloyds has £31bn of maturities over the fourth quarter of 2022 and 2023, and £31bn of “untapped hedge capacity” on top of the £250bn already deployed, they noted.
“It could also be the case that some estimates embed rate cuts although it is not clear from the company consensus what the mean UK base rate is within the consensus," the analysts concluded.