Deutsche Bank has trimmed its target prices for both Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland PLC (LON:RBS) in previews of first-quarter results from the two part-taxpayer owned lenders, both due next week.
In a note to clients, the German bank’s analysts reduced their target price for Lloyds to 66p from 70p, and for RBS to 240p from 252p, reiterating ‘hold’ ratings on both, with the two lenders' share prices still below those levels.
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In early morning trading, Lloyds shares were up 1.3%, or 0.8p to 63.02p, while RBS shares gained 1%, or 2.3p at 226.9p, helped by an upgrade in rating to ‘neutral’ today from JPMorgan Cazenove.
Lloyds releases first-quarter results next Thursday, April 27, and Deutsche is forecasting underlying pre-tax profits of £1.855bn, with income down around 1% quarter-on-quarter, and impairments higher - but off a low base.
Of interest ….
As ever, the bank’s analysts said, they expect the focus to be on net interest income and net interest margin performance and outlook.
They pointed out that although there is upside to its new target price they “do not expect the shares to outperform whilst UK macro and political uncertainties persist.”
The analysts concluded: “Though Lloyds looks cheap on 2017 P/E, unlike most other banks in Europe the P/E rises in future years rather than falls.”
Relatively quiet …
As for RBS, it will release results on Friday April 28, although given that targets and guidance were updated with full-year 2016 results the Deutsche analysts expect the bank’s first-quarter to be “relatively quiet”.
The analysts said: “Of greater focus to the market will be how margins and loan growth performed in 1Q17 (management expect the two to offset each other over the medium term) and the Natwest Markets division after a volatile income performance over the last 2 years.”