Barclays Capital has initiated coverage on the major UK banks with a preference for new European top pick, Lloyds Banking Group PLC (LON:LLOY) and for Royal Bank of Scotland Group PLC (LON:RBS).
In a note to clients, BarCap’s analysts said they had started Lloyd’s with an ‘overweight’ rating and a 90p price target, and RBS also with an ‘overweight’ and 310p target price.
READ: Lloyds serves up 'tasty' dividend yield but analysts wary of economic downturn
In late morning trading, Lloyd’s shares were 0.4% higher at 66.98p, while RBS was down 0.8% at 255.7p.
They said their positive stance on the two lenders reflects expectations for UK net interest margins to beat a pessimistic consensus and its earnings estimates are over 10% ahead of consensus.
The analysts also said Lloyds has becomes BarCap’s new European banks sector top pick, replacing Banco Santander.
Cautious on StanChart
The BarCap analysts also started coverage on emerging markets-focused Standard Chartered PLC with an ‘underweight’ rating and a 685p, and global lender HSBC PLC with an ‘equal-weight’ rating and 700p target.
They said that while they expect resilient Asia-Pacific economies to support earnings, they are cautious on Standard Chartered given its lofty valuation and are balanced on HSBC ahead of a more detailed strategic plan from new management.
Shares in HSBC were up 0.8% at 696.1p, while Standard Chartered lost 0.2% at 762.2p.