Shares in Lloyds Banking Group PLC (LON:LLOY) advanced on Monday after the firm received the backing from City heavyweight UBS, which said the stock is one of its “top picks in the European banking sector”.
UBS pointed towards the fact that adjusted profit before tax for the final quarter of 2016 came in 9% ahead of consensus, while there was “better-than-expected income, costs and loan losses.”
The bank, which has the stock as a ‘buy’, added: “We expect improving confidence in margin and loan losses to see the share re-rate. Our price target rises to 80p from 75p.”
As a result of the “improved outlook”, analysts at UBS have upped their adjusted earnings per share (EPS) forecasts for 2017 and 2018 by 11-13%, while near-term dividend per share (DPS) expectations have been increased by 18-30%.
With Brexit on the horizon, UBS told clients that it reckons Lloyds is well-placed to mitigate any fallout from negotiations.
“With the UK due to embark on EU exit negotiations in due course, we prize Lloyds's highly collateralised loan portfolio and flexibility to manage funding costs and opex to deliver strong returns and capital to shareholders.”
The bank added that it expects the government sell-down to be complete by the end of May this year.
Shares in Lloyds were up 0.5p, or 0.7%, to 69.75p.