Lloyds Banking Group PLC (LSE:LLOY) could surprise the City with a £500 million share buy-back with its third-quarter results in October - breaking from its pattern of distributing excess capital at full-year results.
That is the view of Jefferies, which thinks this may help catalyse the shares in the absence of near-term upgrades.
“With Q2 excess capital of £1.5 billion, set to rise a further c.£0.6 billion by Q3 23, we estimate a Q3 buyback of £0.5 billion, with a £2.5 billion buyback announced at 4Q,” the broker said.
Jefferies noted these buy-backs bring pro-forma 2023 estimated CET1 to 13.5%, rising to 14.4% by 2025 as capital generation is greater than distributions.
The broker has also adjusted forecasts to reflect reduced expectations for net interest income.
Its 2023-25 revenue estimates fall 1-3%, driving 2023 underlying pre-tax profit down 7%, and 2024-25 down 3-4%.
The 2023 return on total capital employed forecast is 16.3%, ahead of the 14.9% consensus, rising to 17.8% in 2025 (consensus 14.4%).
Jefferies keeps a 'buy' on Lloyds with an 80p price target, increased from 77p - nearly double today’s 43.32p share price.