Lloyds Banking Group PLC’s (LON:LLOY) decent showing in the recent Bank of England stress tests has cut little ice with Goldman Sachs, which has reiterated its ‘sell’ rating.
The US broker is worried over the mortgage loan book, with the gap between Lloyd's rates and the rest of the market likely to lead to around 3% shrinkage in the second half of 2016 it believes.
This will increase pressure on Lloyds to cut its mortgage rates.
Lloyds’s book average is currently 50 basis points (0.5%) higher than market rates and a cut would have a significant impact on its margins and group profitability.
Goldman sees the next two quarterly updates as key catalysts for the shares as they will reveal 'the true scale of mortgage book erosion experienced during this period of intensifying competition'.
Sell with a 52p target said the broker. Shares today were flat at 61.7p.