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NatWest and Lloyds preferred among UK banks by Citi analysts

The investment bank said they expected further write-backs from the sector in the second quarter, adding that the recent lifting of the dividend ban “implies a return to more normalised capital return payouts”

NatWest Group - NatWest and Lloyds preferred among UK banks by Citi analysts

NatWest Group PLC (LON:NWG) and Lloyds Banking Group PLC (LON:LLOY) are the UK banks most preferred by Citi, who said they remained ‘overweight’ on the sector as the UK continued its reopening from lockdown.

In a note on Wednesday, the investment bank said the bounce-back in the UK’s economy had been “sharper than expected” with gross domestic product (GDP) growth “well ahead of expectations”.

READ: Lloyds, Barclays, HSBC and other UK banks move higher as dividend ban lifted

As a result, analysts said they expected further write-backs from the banks in their results for the second quarter, adding that the possibility of rising inflation may “force the [Bank of England] to hike [interest] rates earlier than first envisaged”, increasingly their money-making abilities.

Citi also said that the removal of bank dividend restrictions, announced by the Bank of England’s Prudential Regulation Authority on Tuesday, “implies a return to more normalised capital return payouts”.

Analysts at Citi rate NatWest, Lloyds and HSBC Holdings PLC (LON:HSBA) at ‘buy’, while Barclays PLC (LON:BARC) and Standard Chartered PLC (LON:STAN) are rated at ‘neutral’.

In lunchtime trading, NatWest shares were up 1.2% at 203.9p, while Lloyds climbed 1% to 47.2p, HSBC rose 0.3% to 413.4p, Barclays increased 0.9% to 171.4p and Standard Charted inched up 0.3% to 449.8p.

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