Lloyds Banking Group PLC (LSE:LLOY) remains Barclays' favoured UK banking play, describing it as “simply too cheap”.
The broker was commenting after hosting leading executives from Lloyds, Standard Chartered, HSBC, Virgin Money UK and NatWest.
Barclays said the Lloyds CFO William Chalmers discussed his confidence in the operating outlook, despite a subdued outlook for the UK economy, including prospects of a stabilising net interest margin (NIM) given a sizable building hedge tailwind, alongside a strong outlook for book value growth.
The broker says rising deposit costs and mix shift continue to cloud the outlook for near-term NIM in the sector but thinks this is likely to be a period of peak pain, with the outlook boosted by falling UK rate expectations.
A sizable building tailwind from the structural hedge means UK banks can ultimately sustain their rates tailwind, Barclays believes.
“And with provisions set to stay low, and earnings strong, we see compelling value for a patient investor,” it added.
It rates Lloyds 'overweight' with a 70p price target and shares rose 0.8% to 42.48p in London on Tuesday.
HSBC is rated 'overweight' while Standard Chartered, NatWest and Virgin Money UK are kept at 'equal weight'.