Goldman Sachs has maintained its bearish stance on Lloyds Banking Group PLC (LON:LLOY) and Barclays PLC (LON:BARC) after the Bank of England’s decision to raise capital buffers yesterday.
As predicted by the US investment bank last week, the countercyclical buffer goes up to 0.5% from zero and may rise to 1% by November 2018. A 1% buffer would cost the banks a collective £11.4bn.
It was not clear whether there will be an offset somewhere else, said Goldman, but this doesn’t affect its view that Lloyds is exposed to increased competition in the domestic mortgage market or that Barclays continued capital build will mean a more muted outlook for its dividends and profitability.
Barclays own brokerage, meanwhile, said the Bank of England’s concerns on consumer credit were not particularly negative, with banks operating well above regulatory capital requirements and no change in stance on consumer credit.
The two UK regulators, PRA and FCA, are due to publish consumer credit reports next month which the FPC (Financial Policy Committee, will review along with stress test results in November.
Barclays likes Lloyds ('Overweight' target price 77p) and Virgin Money (LON:VM 'Overweight' target price 380p) amongst UK banks.