Lloyds Banking Group PLC (LON:LLOY) is well-placed to buck any Brexit fears and take advantage of higher UK houses prices over the coming years, according to analysts at Morgan Stanley.
Lloyds commands the largest share of the UK mortgage market with a 22% foothold, leaving it well-positioned should house prices continue to rise.
Nationwide’s and Halifax’s latest house price reports took slightly different tones, although the general consensus seemed to be that prices are likely to flatten out after years of strong growth.
Morgan Stanley is a little more upbeat on the situation and is forecasting property values to continue their ascent, while it also sees a decent future for the UK economy as a whole.
“We expect decent nominal economic growth for the UK market long term and see some scope for improvement in banking penetration,” wrote analyst Chris Manners in a note to clients this morning.
“Its strong position in the UK mortgage market and expected rise in housing price over time should help in growing its mortgage book albeit with some intentional reduction in share in the next year or two.”
On top of the bump Manners expects Lloyds to get from house prices, the analyst also likes the lender’s “strong” capital position.
“[This means that] there is less strain to comply with regulations and enough fuel to grow its balance sheet.
“We expect strong capital generation (150-200bps per annum) to offer potential for above average distribution.”
Manners has placed an 85p price target on the target, which he notes would net the UK government a small profit given that it bought in at 73.6p.
Lloyds shares dipped 1% on Monday morning to 65.8p.