Broker snap: Investec lifts target price for Lloyds

10th Dec 2013 10:05

Investec has raised its target price for Lloyds from 80p to 84p and kept a 'buy' rating for the stock, saying that investors looking to take profits should 'wait a little longer'."What a wonderful year for Lloyds! Earnings may have remained marginally negative over the past four quarters, and heavily negative over the past three years, but the stock has re-rated sharply," said analyst Ian Gordon.Since the start of 2013, the stock has risen 64%.He said this re-rating reflects rapid net interest margin expansion, normalising impairment charges, major capital-accretive progress and a reduction of non-core assets - "rendering a resumption of a cash dividend for the first time since 2008 as 'nailed on'".Gordon believes that Lloyds has "executed well" in selling its final tranche of shares in St James's Place, which the company announced on Tuesday morning.This follows recent disposals such as the selling of UK commercial real estate loans, non-performing Irish retail mortgages, and European/Nordic corporate real estate. These were "all achieved close to existing marks with minimal income statement impact, but usefully capital accretive".Investec estimates that Lloyds will report a full-year fully loaded common equity tier-1 capital ratio close to 10.5%.Nevertheless, Gordon said that the broker's forecasts for 2013 still remain "cautious" with earnings per share (EPS) expected to be 1.3p, well below the current consensus estimate of 2.8p. However, momentum is expected to build in 2014 and 2015, he said.Lloyds' share price was 0.78% higher at 78.81p by 10:04 on Tuesday.BC