Lloyds Banking Group PLC (LSE:LLOY) was upgraded by analysts on Thursday as prospects for Britain’s banking sector look to improve into the second half of the year.
Across the sector in February, deposits into non-interest-bearing bank accounts climbed for the first time since October 2022, mortgage lending was positive and business loans grew, KBW analysts said, pointing to this week’s Bank of England data.
“This suggests that many of the pressures on Lloyds earnings, whilst likely to continue in the first half, are dissipating rapidly,” the investment bank continued.
Though Lloyds shares have rallied in recent months on growing optimism of better conditions in the latter half of the year, such as from rate cuts, KBW noted the stock was trading at a 20% discount to long-term averages.
“We continue to believe that UK incumbent banking is in long-term structural decline from new entrants with better cost and higher customer satisfaction,” KBW added.
“But, it is clear that 2024 is set to be a cleaner year than we have seen for some time.”
Lloyds was upgraded to an ‘outperform’ rating as a result, with KBW hiking its share price target from 55p to 60p.
Shares in the bank climbed 2.75% to 53.82p on Thursday.