Broker snap: Lloyds geared to a UK recovery

17th Feb 2011 10:12

Lloyds Banking Group has the best exposure to recovery of traditional banking, without the overhang of a capital markets franchise, Nomura suggests.The Japanese broker estimates a group loss before non-operating items for 2010 of £959m, much improved on a loss of £12.4bn in 2009. Nomura also forecasts a much lower impairment charge of £14.25bn, compared with £24bn previously."We view Lloyds as offering the highest gearing to a recovery of traditional banking profitability in the UK, without the dilution from capital markets operations," says analyst Robert Law.While the broker does expect the pace of recovery of margins and impairments to slow after the rapid improvements in 2010, it says that the bank still supports an attractive normalised return on equity of 15% for 2012.Nomura's stance remains 'buy' with a price target 80p.