Broker snap: Nomura rates Lloyds a buy

27th Jul 2009 10:51

Japanese brokerage Nomura has upgraded part-nationalised bank Lloyds Banking Group ahead of the UK banks' interim results season."As substantially all the highest-risk assets are believed to be included in the APS [asset protection scheme], we believe Lloyds' TBVPS [tangible book value per share] has among the least downside risk of major banks, after the first loss piece is exhausted," said Nomura analyst Robert Law.Nomura is bearish on the sector in general but has upgraded Lloyds from "reduce" to "buy" and bumped up its target price to 100p from 58p. "In our view, one of the key issues under focus at the upcoming UK banks' interim results would be the prospects for normalised earnings for the banks. This would include judgements about the outlook for wholesale and retail/commercial banking businesses. Wholesale businesses are likely to have sustained their Q1 revenues in Q2, while commercial banking businesses are suffering from falling margins and rising credit losses," Law believes."While we still see risks around credit quality, the read-across from US and European banks indicates some positives," Nomura concludes.