Broker expects distributions and tangible net asset growth to peak in 2026
Lloyds Banking Group PLC (LSE:LLOY) is set to deliver one of the strongest value creation profiles among European banks, according to Deutsche Bank, which has raised its price target to 125p from 110p and reiterated its buy rating.
Analyst Robert Noble said Lloyds’ core attraction lies in a projected step-up in tangible net asset value growth and distributions, with combined TNAV and dividend growth expected to peak at 17% in 2026.
The bank said this would place Lloyds among the top performers in Europe, supported by an improving revenue outlook, stronger returns and the earnings visibility provided by its structural hedge.
Deutsche said the increase in its valuation reflects the growing contribution from distributions over the coming years, which it believes the market is not yet fully pricing in.
Return on tangible equity is expected to improve meaningfully, driven by operational leverage and a more benign cost backdrop, while litigation charges are forecast to normalise after several years of drag on profitability.
The broker also highlighted the unwind of Lloyds’ structural hedge as a further contributor to TNAV growth, supporting capital generation even as interest rate tailwinds begin to fade.
Deutsche expects growth to moderate after 2026, with TNAV and dividend growth easing to around 13% to 14% a year in 2027 and 2028, though still at levels it considers attractive.
Shares in Lloyds closed on Monday at 108.95p, leaving scope for further upside if the group delivers on the expected improvement in returns and capital distribution.
Deutsche Bank said Lloyds’ ability to convert earnings into shareholder value remains a standout feature relative to peers, underpinning its positive stance on the stock.
In late morning trading, the shares were up 1.4% at 112.95p.