Lloyds Banking Group Plc (LON:LLOY) and Virgin Money Holdings (UK) Plc (LON:VM. are the preferred banking stocks for Barclays Capital analyst Rohith Chandra-Rajan, following the latest initiatives rolled-out by the Bank of England on Tuesday.
The central bank raised the requirements for countercyclical capital buffers 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.
Chandra-Rajan, in a note, brushed away any potential concerns over the banking sector.
“The June 2017 Financial Stability Report from the Bank of England announced an increase in the UK countercyclical capital buffer, consistent with the UK being in a 'standard risk environment', and provided a little more detail on the FPC's concerns on consumer credit,” the analyst said in a note.
“We don't see either as particularly negative, with banks operating well above regulatory capital requirements and no change in stance on consumer credit.”
Both Lloyds and Virgin Money are ranked as ‘overweight’ with analyst Chandra-Rajan saying both are Barclays’ preferred names in the sector, setting targets of 77p and 380p respectively (current prices: 66p and 268p).