Broker snap: Lloyds to give back some gains, says Credit Suisse

23rd Oct 2012 09:19

Credit Suisse has maintained its 'neutral' rating and 31p target price for UK banking group Lloyds ahead of its third-quarter results on November 1st.The broker expects an 'underlying' pre-tax profit of £580m and a 'management' pre-tax profit of £933m (including £350m of fair value unwind) for the three months to September 30th."With the stock having been recently supported by market expectations of early capital return, we reiterate our view that we do not see Lloyds resuming dividend payment before 2014E (Credit Suisse estimate - 1.0p) especially in light of the recent Financial Policy Committee comments," Credit Suisse said.The broker says that it has not included any further provisions in its forecasts for Payment Protection Insurance (PPI) claims. "Having taken a total of £4.3bn PPI charge so far, the implied charge following Barclays announcement could be up to c£1.5bn."Credit Suisse believes that Lloyds's capital position is comfortable with the Basel 3 fully loaded ratio expected to increase from 8.0% at the end of this year to 9.0% next year under its estimates.With the stock trading at 0.6 times 2013 estimated tangible net asset value (tNAV) for a 5-7% return on tangible equity (RoTE), the broker reiterates its 'neutral' rating "but believe that given recent strength the stock should give back some of the gains"."There is a still a long way to go, although the group has made good progress in restructuring and improving its funding profile."By 10:07, shares were down 2.03% at 39.99p.BC