Shares in Lloyds Banking Group PLC (LSE:LLOY) jumped 3.5% after Deutsche Bank raised its price target from 80p to 88p while maintaining its 'buy' recommendation.
It cited strong revenue growth, book value expansion, and robust capital returns as key drivers of its optimism.
Analyst Robert Noble highlights that Lloyds' stock currently trades at 1.3 times its tangible net asset value (TNAV), but by 2027, this is expected to fall to 0.9 times.
He forecasts a return on tangible equity (ROTE) of 16% by then, with a capital return yield also at 16%. If the bank’s strategy stays on course, he sees further upside for shareholders.
Lloyds generates between £5 billion and £6 billion of organic capital annually, in addition to an already strong capital position.
Even with projected dividend growth of 15-20% per year, the dividend payout ratio is expected to remain in the mid-40s.
To reach its target of a 13.0% common equity tier 1 (CET1) ratio by 2026, Deutsche Bank expects Lloyds to step up its share buybacks significantly.
By 2027, Deutsche Bank estimates capital returns per share could nearly double compared to 2024 levels, reinforcing its bullish stance on the stock.
The shares were up 2.4p at 71.02p.