Barclays PLC (LSE:BARC), Lloyds Banking Group PLC (LSE:LLOY), NatWest Group PLC (LSE:NWG), OSB Group PLC (LSE:OSB), and Paragon Banking Group PLC (LSE:PAG) won unanimous 'buy' ratings from Jefferies on Wednesday as the broker upgraded target prices across the pack.
At the heart of the revision, the broker bumped Barclays to 600p from 590p, alongside target hikes for Lloyds to 127p from 125p and NatWest to 770p from 730p.
On the same note, specialist lenders joined the rally, with OneSavings Bank lifted to 720p from 700p, while Paragon was pushed to 1,070p from 1,000p.
That optimism is underpinned by robust capital generation, with the broker forecasting that sector distribution yields will comfortably exceed 12% by financial year 2028.
Those payouts are backstopped by structural hedge tailwinds, which are poised to add up to 6% to underlying returns while cushioning margins against fierce competition from term deposits.
Furthermore, the significant escalation in transfers of corporate loan books to third parties continues to release balance sheet equity and protect earnings against potential credit write-offs.
Treasury tax risks also appear manageable, with the analyst arguing that lenders could readily absorb a combined package of a 2pp surcharge increase and a deferred tax asset moratorium at the autumn budget to raise 1.5 billion pounds for the state.
Dominating the horizon into November is the grand finale of the regulatory capital review, where an easing of domestic risk add-ons could unleash substantial surplus capital across the industry.
