Exane BNP Paribas downgraded UK banks Barclay’s (LON:BARC) and Lloyds (LON:LLOY) with the former reduced to ‘underperform’ from ‘neutral’ and the latter cut to ‘neutral’ from ‘outperform’.
Standard Chartered (LON:STAN), HSBC (LON:HSBA) and RBS (LON:RBS) also saw their price targets cut by BNP, though the ratings (underperform, neutral, and neutral) remained the same.
There is now nowhere to hide for the UK banks, according to analyst Jonathan Pierce.
“While share price performance has been lacklustre this year, we believe the banks face further operational headwinds,” he said in a note.
Specifically, Pierce highlights that the impact new financial reporting standards (IFRS9), despite its caveats, could hit near term dividend expectations.
He also expects new Bank of England requirements that lift the bar for MREL (the minimum requirement for own funds and eligible liabilities) – which basically means they must hold onto more capital – could result in a 3% to 6% reduction in earnings per share.
And, contrary to consensus, Pierce doesn’t expect anticipated interest rate rises will help the banks.
The margin outlook appears increasingly bleak regardless of higher rates, he said.
Elsewhere, Bank of America Merrill Lynch reckons HSBC (LON:HSBA) is not too bad, now, as it upgrades the banking share to ‘neutral’ from ‘underperform’.
Analysts at HSBC, meanwhile, have downgraded UK bookie William Hill (LON:WMH) to ‘reduce’ from ‘hold’.
BP (LON:BP.) was upgraded to ‘outperform’ from ‘market perform’ by Bernstein, and the price target has been set at 450p, some 30% above the current price of 337p.
CBA upgrades Rio Tinto (LON:RIO) to ‘overweight’ from ‘neutral’.
Phoenix Group (LON:PHNX), the insurance services firm, is upgraded to ‘overweight’ from ‘neutral’ and set its price target to 890p, implying about 5% upside to the current price of 845p.
Macquarie lifts its rating of Talk Talk Telecoms (LON:TALK) to ‘outperform’ from ‘neutral’.
House broker WH Ireland has a ‘buy’ rating on Avation (LON:AVAP) after the recent results and expects the aircraft lessor to grow strongly over the next two years.
Avation takes delivery of a further 10 aircraft this year but has capacity to expand even faster if uses the capital from the recent bond issue for additional jet acquisitions to boost growth in 2016 and 2017.
Target indicators such as industry leading yields, overall remain positive and should be helped by the increased scale, while management have also been careful about managing risk by acquiring popular aircraft and being selective in broadening the airline customer base.
Buy with a target price of 206p said the broker. Shares today were 3% higher at 138p.
Mirabaud has started coverage on recent Aim-listing Harvest (LON:HMI). And based on conceptual models for the potash group’s Arapua and Sergi deposits its target price is 4.3p per share. As this is a 320% premium to the current share price, the broker rates Harvest a speculative buy.