Citi has ranked Lloyds Banking Group PLC (LSE:LLOY) as the 'least preferred' UK bank in its coverage, assigning the lender a 'neutral' rating and expressing concerns over its ability to deliver upside surprises.
While UK banks have seen strong year-to-date gains, with shares rising between 9% and 303%, Lloyds has been one of the top performers alongside Standard Chartered.
However, Citi flagged that while Barclays PLC (LSE:BARC), HSBC Holdings PLC (LSE:HSBA), and NatWest Group PLC (LSE:NWG) have set return-on-equity (RoTE) targets based on conservative assumptions, Lloyds and Standard Chartered appear to have less flexibility to outperform expectations.
Of the five major UK banks, four beat profit forecasts in the fourth quarter of 2024, with only Lloyds meeting rather than exceeding expectations.
Citi remains above consensus on NatWest and HSBC but below consensus on Lloyds and Standard Chartered, suggesting a more cautious stance on their ability to drive growth.
Citi’s preferred order of UK banks is NatWest, HSBC, Barclays, Standard Chartered, and finally Lloyds at the bottom of the list.
In late morning trade, Lloyds, up 33% year to date, was flat at 73.16p.