Lloyds Banking Group PLC (LSE:LLOY)’s estimates have been tweaked by analysts at RBC Capital Markets which continues to see plenty of upside in the stock.
The broker has updated its model following the restatement of Lloyds’ accounts, which now incorporate the actual impact of the IFRS 17 accounting standard on financial year 2022 historical data.
The standard aims to ensure consistent accounting treatment of insurance contracts around the world, specifically the timing of when revenue is to be recognised and how the contracts are valued.
RBC said its financial year adjusted pre-tax profit forecast at Lloyds is unchanged as its previous estimates already incorporated the impact of IFRS 17 on the lender’s Insurance, Pensions and Investment division.
It has made minor changes to its net attributable profit estimates driven by slight adjustments to non-controlling interest assumptions.
The updated estimates continue to include the latest guidance and commentary (as of quarter four 2022) on the impact of IFRS 17 on the bank’s accounts.
Under IFRS 17, financial year 2022 adjusted other income decreases by around £0.6bn (11%) while adjusted costs decrease by around £0.2bn (2%), which leads to a reduction of around £0.4bn in adjusted pre-tax profit (6%) compared to previous accounts under IFRS 4 (the standard being replaced by IFRS17).
Tangible book value per share as of quarter four 2022 is reduced by 5.4p to 46.5p.
RBC remains a fan of Lloyds reiterating an outperform rating and maintaining a 70p per share price target.
Shares in the lender rose 1% to 49.92p each in London on Wednesday.