Lloyds Banking Group PLC (LSE:LLOY) won a broadly positive response from City analysts after its half-year results and strategy update, with brokers arguing that its new targets may prove conservative.
Citi reiterated its 'buy' rating, saying the new plan looks built on "conservative assumptions" and so offered additional upside from Lloyds' proposed consumer 'ecosystem' spanning housing, cars, wealth and insurance.
Citi's analyst Andrew Coombs said assumptions for structural hedge returns, balance-sheet growth and lending margins were more cautious than it initially realised. His calculations suggested annual net interest income could be around £950 million higher than implied by Lloyds' 2028 targets.
Most of that would reach the bottom line, Coombs said, potentially lifting return on tangible equity to around 20% compared with Lloyds' target of more than 18%.
RBC also reiterated its 'outperform' rating and raised its price target to 124p from 120p, citing "increased visibility over the bank's future earnings trajectory".
It forecasts returns on tangible equity of 19.9% in 2028 and 21.8% in 2030 – both above management's targets. RBC also expects Lloyds to return £33.3 billion to shareholders between 2026 and 2030 through dividends and buybacks, equivalent to an average annual yield of 11.1%.
Jefferies, which has a buy' rating and 125p price target, said the interim numbers contained "little surprises" other than a 30% rebasing of the dividend.
The broker described the long-term RoTE target of around 20% as "helpful" but cautioned that "the journey there may be a little light of consensus driven by both revenue and costs".
"Balance sheet growth will also hold back free capital generation (although that isn't necessarily a bad thing)."
Lloyds shares were roughly flat at 115.4p on Friday afternoon, having jumped 3% the previous day.
