In a note entitled “The 12 days of banks-mess”, analysts said Lloyds is set to outperform its peers, despite investors being sceptical of its strategy, as it is perceived as clean, simple and highly exposed to the UK economy.
However, Berenberg's number crunchers pointed out this would just be a short-term dynamic for the horse, while RBS can capture long-term benefits given its larger interest rate gearing and capacity to further increase lending, especially as credit losses normalise.
Noting that “Christmas did not come early for bank investors”, the analysts got into the spirit for the year ahead with a reflection on 12 festive themes: 12 months ahead, 11 years since Lehman, 10 outperform years, Nine months of protests, Eight – sector P/E, Seven laundry rumours, Six Commerz-bidders, Five winning banks, Four Basels looming, Three US rate cuts, Two rounds of QE and A party in the UK.
According to Berenberg, the impact of this year’s events will echo in 2020, inviting investors to be cautious over the sector.
“We believe headwinds from low interest rates and structural challenges facing investment banks remain poorly reflected in consensus and that cost inflation from the necessary investment in compliance and risk controls may be material,” analysts said in a note.