Citi is still keen on the UK banking sector but prefers the domestically-focused operators against the international groups.
Lloyds remains its favourite, though it’s a buyer of all of the main players as its sees re-pricing initiatives leading to consensus NII (net interest income) upgrades, while downside risks appear contained based on low unemployment and low debt service ratios vs history.
“The Conservative leadership contest adds some uncertainty to future fiscal and monetary policy, but we would argue UK bank shares are already pricing in little in terms of rate hikes.”
Into 2Q22 results, Citi adds it is most above consensus on Lloyds and Standard Chartered and most below on HSBC and NatWest.
Lloyds rose 2.2% to 42.8p.