Two German brokers had a mixed response to Lloyds Banking Group PLC's (LON:LLOY) first-quarter results, published on Wednesday, with Deutsche Bank cutting its target price for the stock, but Berenberg increasing its target.
In a note to clients, analysts at Deutsche Bank trimmed Lloyds' target price to 76p from 78p but retained a ‘buy’ rating on the stock.
READ: Lloyds dividend yield ‘attractive’ but higher impairments and PPI scandal weigh, say analysts
The analysts noted that Lloyds net interest income included around a £20mmln of reclassification on overdrafts from other income, which they estimate contributed circa 1.8 basis points (bps) to the group's net interest margin in the first-quarter.
They said: "The improvement in underlying margin was largely down to lower liability pricing (retail rates now at c.39bps vs. 41bps in 4Q17) with asset pricing flat (despite a tough mortgage market).
Berenberg, meanwhile, raised its price target for Lloyds to 60p from 55p but kept a sell’ rating on the stock.
It's analysts said they believe that revenue weaknesses in Lloyds’s first quarter 2018 results illustrate the susceptibility of the bank’s strategy to external conditions.
Although the analysts believe that Lloyds is overvalued, they increased the price target "to reflect earnings improvements during recent quarters.”
In lunchtime trading, Lloyds’ shares were 0.2% lower at 64.90p.