Lloyds Banking Group has been upgraded by RBC, which sees its emphasis on cost control as preferable to growing income in the current environment.
The Canadian bank has put a price target of 57p on the shares, as it expects the market to start to reward Lloyds for its prudence.
“With inflation expectations stabilising and a more balanced outlook for the forward interest rate curve, we think that the rates trade has now played out,” it said in a note.
“Deposit betas will likely increase from here, although banks like Lloyds, with better digital banking and branch offerings, should be able to keep betas lower for longer.”
Valuation ratios such as price to book value are attractive, while the bank also stands well compared to historic yardsticks.
RBC also believes Lloyds' asset quality could hold up better than peers going into a potential recession.
Outperform is RBC’s view with its share price target implying a 24% upside.
Shares were up 0.6% at 46.2p