The Swiss bank, in a note to clients published on Monday, cut its share price target for the FTSE 100-listed bank to 62p from 65p but maintained its ‘buy’ recommendation.
Last week’s third-quarter numbers from Lloyds were “disappointing”, with adjusted profit before tax of £1.8bn that was 8% below the City consensus but net interest margin in line with expectations at 2.88%.
Despite a tougher top-line outlook, which saw UBS cut its earnings per share forecasts 2-5% for the coming years, this “we believe the investment thesis at LBG has not changed materially”.
On the conference call with analysts after the results, the board reinforced their plans for balance sheet growth, a 6% dividend yield and 2% of market cap buyback each year by stressing that there was to be no change to the strategic target of 170-200 basis points of annual capital generation.
“This capital generation should also allow the bank to continue to invest in efficiency and customer proposition, helping to underwrite future growth and returns,” UBS said.
Lloyds is “under tight control in a challenging top-line environment”, UBS said, suggesting the shares are “attractively valued for a stable-rates base case with upside gearing if the macro outlook improves”.