Part-taxpayer owned lender Lloyds Banking Group PLC (LON:LLOY) received a New Year boost from Barclays, which has upgraded its rating for the high street rival.
Analysts at the bank have hiked their stance for Lloyds to ‘overweight’ from ‘equal-weight' and raised their share price target to 75p from 55p after upping earnings estimates for the firm.
In a note to clients, they said: “UK economic prospects remain challenging and uncertain but less severe than we had previously anticipated.”
READ: Lloyds buys MBNA UK card business …
The analysts said, on the bank’s revised economic assumptions, they expect Lloyds net interest margin to rise helped by the rising rate environment and the group’s planned MBNA credit card acquisition, announced before Christmas.
They added: “Together these drive c15% upgrades to our underlying earnings estimates in 2017 and 2018, suggesting that Lloyds can make a c13% RoTE over the next three years and return close to a quarter of its market cap to shareholders.”
In early trade, Lloyds shares were up 1.25%, or 0.8p at 65.5p.
Lloyds unveiled the £1.9bn cash purchase of MBNA’s UK card business from a unit of Bank of America Corp. (NYSE:BAC) on December 19.
The lender said it anticipates it will be able to deliver £100mln in annual cost synergies from the integration of MBNA within two years, around 30% of the total cost base for MBNA in 2015.