For a bank so often seen as a barometer of the British economy, Lloyds Banking Group PLC (LSE:LLOY) keeps proving remarkably predictable.
RBC has nudged its price target up to 100p from 95p and kept its 'outperform' rating after the lender’s third-quarter results came in a touch ahead of expectations.
The numbers themselves were fine rather than flashy. Profit before tax fell to £1.3bn, partly thanks to a chunky £875m provision for customer redress in its motor finance business.
Strip that out, and operating income rose 7% year on year, with net interest income up 7% as loan growth and deposit margins both improved.
The key net interest margin, the difference between what Lloyds earns on loans and pays on deposits, widened to 3.06%, slightly better than expected.
RBC’s analysts see scope for further progress, modelling a margin of 3.28% next year and returns on tangible equity of 16.6%.
The structural hedge, which smooths earnings from rate changes, should keep delivering, and shareholder returns look healthy: £14.6bn over the next three years through dividends and buybacks.
The motor finance saga still lingers, but RBC reckons the regulator will water down its proposed redress scheme rather than force another courtroom fight. That assumption keeps forecasts intact and underpins the upbeat view.
At 85p, the shares trade on barely eight times next year’s earnings and yield almost 4%. It’s not a racy story, but for steady returns in a muddled economy, Lloyds remains a familiar port in the storm.