Keefe Bruyette & Woods (KBW) remains a fan of Lloyds Banking Group PLC (LSE:LLOY) after taking a closer look at the business banking arm, which contributes about 15% of the group's earnings.
This follows a seminar where Lloyds showcased its strategies for digitisation and diversification, drawing favourable comparisons to Barclays' offerings for small and medium-sized enterprises (SMEs) and mid-sized companies.
KBW noted that both Lloyds and Barclays PLC (LSE:BARC) are focusing on expanding their digital services, increasing loan offerings, and promoting other group products to business customers.
Despite both banks pursuing similar strategies, KBW reckons Lloyds is currently in a stronger position and has good potential for growth.
Overall, KBW remains positive about Lloyds, rating the shares as "outperform" with a target price of 65 pence.
The investment bank considers the current valuation, with a price-to-earnings (P/E) ratio of 7.9 times and a price-to-tangible-book-value (P/TBV) ratio of 1.1 times, to be reasonable.
These metrics are used to assess a company's stock price relative to its earnings and book value, respectively.
KBW believes these ratios are favourable, especially considering the bank's return on tangible equity (ROTE) objectives, which measure how effectively a bank uses its tangible assets to generate profits.
Lloyds shares were up 2% at 55.86p.