Broker snap: Daniel Stewart upgrades RBS and Lloyds on reprivatisation hopes

16th May 2013 10:23

Daniel Stewart & Company has raised its ratings for part-nationalised lenders RBS and Lloyds to 'buy', saying that placings of the government stakes in 2014 now look like a 'strong probability'.An article in the Financial Times on Wednesday evening said that David Cameron has dropped his strongest hint yet that the two banks, which were bailed out during the financial crisis, would be ready for reprivatisations next year, something that each lender had flagged in their first-quarter results.Regarding the timing of the transactions, Daniel Stewart analyst Simon Willis said that the third or fourth quarter of next year was his initial prediction, though "suddenly Q1/Q2 [in 2014] looks feasible".He said that Lloyds' first quarter was "distinctly encouraging" and justifies the stock's price-to-tangible net asset value (P/TNAV) ratio of 1.0 (on 2013 estimates). Daniel Stewart has a 70p target price for Lloyds shares.Meanwhile, while RBS's first quarter was "unimpressive by comparison with Lloyds, its P/TNAV of 0.6 is the lowest in the sector. While the broker has a 400p target price for RBS, it says that a re-rating (which should happened "in due course") to a P/TNAV of 1.0 would put the stock at 500p.Lloyds was up 0.99% at 59.96p by 10:32, while RBS was 0.96% higher at 309.95p.BC