Lloyds Banking Group PLC (LSE:LLOY) and NatWest PLC remain Credit Suisse’s top picks in the UK banks sector, with the geopolitical risks from Ukraine underlying their defensive appeal.
The key risks that the Swiss broker sees to the sector are lower Bank of England rate hikes than expected, a larger spillover effect from geopolitical risks such as Ukraine than currently assumed and more competitive pressure than we anticipate in key product markets.
Both Lloyds and NatWest, however, are rated as 'outperform' by Credit Suisse, which suggests that at present the ratings still offer good value..
Lloyd showed the best underlying trends in the recent banking earnings season and driven by revenues notes the broker while, along with its peers, net interest income was comfortably better than consensus.
Natwest meanwhile has the highest CET1 ratio of the UK bank group according to the broker’s forecasts followed by Lloyds, suggesting the pair have the most leeway for returns to shareholders.
Shares in Lloyds were up 0.2% to 46.2p while Natwest was unchanged at 220p.