Lloyds Banking Group PLC (LON:LLOY) is the “last man standing” for investors in the big four high street banks, according to Investec’s Ian Gordon.
The analyst prefers the newer so-called challenger banks to the UK majors but sees some value in Lloyds even though it faces challenges.
A shrinking balance sheet, declining net interest margin, rising impairments and further restructuring/conduct costs are just a few potential issues.
Lower savings rates, a higher savings/loans ratio and better mortgage returns, however, may be able to offset these.
As a result, reported profits and dividend-paying capacity will continue to recover strongly durng 2016-18 even if underlying profits dip over the period, Gordon says.
The bank's chief executive, Antonio Horta-Osorio, has also committed his future to the bank despite the recent ructions in his private life.
While the broker’s target price is cut to 68p, from 79p, ‘buy’ remains the investment view.
Shares today were 57.32p, down 1.3%.