Deutsche Bank has trimmed its target prices for Lloyds Banking Group PLC (LON:LLOY), Royal Bank of Scotland PLC (LON:RBS), and HSBC PLC (LON:HSBA) in a note previewing the first-quarter results season from the UK lenders, due to start in around a fortnight’s time.
In a note to clients, the German’s bank’s analysts said they expect margin pressures will remain the main area of focus for the UK domestic lenders, amidst clear signs of competitive pressure on mortgage pricing.
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They pointed out that their swap-adjusted margin monitor shows near-record lows for mortgage spreads.
For internationally-focused lenders, the analysts expect currency factors to benefit US dollar revenues in the first-quarter, but are wary of cost inflation at both HSBC and Standard Chartered PLC (LON:STAN).
They said overall, they remain overweight on large UK domestics, neutral on internationals, and underweight on challenger banks.
The analysts trimmed their target price for Lloyds to 78p from 80p, and cut RBS’s price target to 304p from 305p, retaining ‘buy’ ratings on both stocks.
They reduced HSBC’s target price to 680p from 700p, but raised Standard Chartered’s to 680p from 653p, keeping ‘hold’ ratings on both.
Lloyds will kick off the UK sector’s first-quarter reporting season on Tuesday 24 April, followed by RBS on Friday 27 April.