Shares in the FTSE 350-listed big banks all still offer value for investors amid the market's nerves about the economic outlook, reckons Shore Capital, seeing an average 53% upside to fair value.
The broker reiterated its 'buy' rating on the sector, with Barclays PLC (LSE:BARC) and Virgin Money UK PLC (LSE:VMUK) seen as offering the most potential upside.
Following in the list are Standard Chartered PLC (LSE:STAN), NatWest Group PLC (LSE:NWG), Lloyds Banking Group PLC (LSE:LLOY) and last of all HSBC Holdings PLC (LSE:HSBA), a fresh upgrade from 'hold'.
Recent second-quarter results from the UK banks followed a similar theme to the first, said ShoreCap analyst Gary Greenwood, with financial performance reflecting a tailwind from rising interest rates as well as a continued low level of impairments despite growing economic uncertainty.
Double-digit return-on-tangible equity (RoTE) targets were either upgraded or reaffirmed while most banks announced further special shareholder distributions.
"Even so, the sector continues to trade at a 27% average discount to tangible net asset value suggesting the market remains nervous about the outlook.
"We are more upbeat and believe banks are much better positioned to cope with the economic storm than the market is giving credit for."
For Barclays, the ShoreCap target price is 325p, which offers 91% upside based on the last close price of 170p, while for VMUK a target of 285p offers 83% upside to its current 156p.
StanChart's 850p target equates to 41% upside; NatWest 40% based on a 365p target; for Lloyds the 62p target would give a 36% gain; and for HSBC the price target is 695p, giving 26% potential upside.