Lloyds Banking Group PLC (LSE:LLOY) half-year results next week should offer scope for some share price outperformance from the bank according to UBS.
The broker highlights a number of areas where the banking group could shine, namely returns from deposits, more targeted mortgages to protect spreads and increased hedge size and duration.
Consensus forecasts are for 3% net interest income growth (against 8% for NatWest Group) and while other operating income (OOI) is hard to forecast UBS expects the market to focus on where the market run rate OOI settles now and on the numerous initiatives announced as part of new boss Charlie Nunn's three-year plan.
UBS expects the market to also focus on the loan loss outlook with a focus on commercial and SME credit risk in particular.
A further focus will be on the Tier 1 ratio, a source of strength in the past.
Any improvement could lead to share buybacks which could be a key plank to a re-rating.
Lloyds Bank shares currently trade at 43.25p.
Barclays PLC is expected to report a further charge in its half-year results following the recent disclosure of an SEC breach.
The control failure forced the bank to restate its FY21 numbers by £200mln and make provisions in the first quarter of £320m.
Barclays provided guidance that a 5% fall in the S&P is worth a £300m increase in recission costs and UBS expects with the S&P down 16% in the past three months there will be a further charge of £900m in the litigation.
No major movement in credit quality is expected but UBS expects the focus to be on commercial credit risks.
Tier 1 is seen falling to 13.4% from 13.8% although no further share buybacks are expected.
The group is currently trading at 159p.
NatWest Group PLC (LSE:NWG) by contrast is set is to announce a further share buyback with its results on Friday.
UBS forecasts a further £1bn with costs to be a strong market focus given the domestic inflation numbers and the recently announced £1,000 pay increase for its 22,000 staff.
No major deterioration in credit quality is expected despite uncertainty around commercial and SME credit.