Lloyds Banking Group PLC (LSE:LLOY) is Deutsche Bank’s preferred UK banking play, helping push shares up 3.0% today.
The German investment bank has reiterated its ‘buy’ rating on the high street lender despite nudging its price target down to 62p from 63p.
“Our preference among UK domestic banks is Lloyds which we believe has a more stable deposit base; lower NIM sensitivity to deposit outflows; lower consensus expectations; and with a substantial yield,” analyst Robert Noble said.
Noble expects monetary policy to have incrementally negative impacts on the outlook for UK banks.
“As liquidity tightens we expect banks' will shrink and cost of funding will increase,” he said, adding “there is risk that the BOE passes more costs onto the banks through rate reform.”
However, he explained the current valuation of UK banks more than adequately compensates for these risks.
Noble rates Barclays PLC (LSE:BARC) at hold with a price target of 200p, down from 230p, NatWest Group PLC (LSE:NWG) buy with a price target of 320p down from 370p and Virgin Money UK PLC (LSE:VMUK) hold with a price target of 210p, down from 220p.
Shares in Lloyds were 3.0% higher at 45.74p.