Broker snap: Investec downgrades Lloyds after outperformance

17th Aug 2012 12:21

Given Lloyds's resilient share price performance so far this year, Investec has downgraded its rating on the bank from 'buy' to 'hold'.Analyst Ian Gordon said: "Up 27%, Lloyds' shareholders can take satisfaction from the stock's year-to-date outperformance against all other UK banks."He said that the medium-term outlook for the lender still offers some further recovery with group net interest margin at a tipping point and balance sheet metrics improving. Meanwhile, the £1bn private equity disposal announced earlier this week is "indicative of a resilient impairment performance despite some deteriorating property-based metrics". Nevertheless, the broker said that the outlook for return on equity (RoE) recovery "remains painfully slow, with scope for negative surprise".The target price was reduced by 10% from 40p to 36p to reflect an incrementally slower pace of RoE recovery in the outer years.Nevertheless, shares were up 2.08% at 33.67 on Friday afternoon, in line with the wider European banking sector.BC