Broker snap: Recovery stock Lloyds attractively valued

2nd Nov 2010 13:26

Investment house Killik has reiterated its positive recommendation on Lloyds Banking Group after the part nationalised lender's interim management statement indicated things are ticking along much as expected. "The Lloyds investment case is a simple one of recovery from the impact of the financial crisis and the merger with HBOS. Management aim to return to a normalised earnings level by 2014 through targeting four earnings drivers: revenue growth through improving net interest margin, cost efficiency through merger cost savings, a return to normalised impairment charge and restructuring the balance sheet to reduce reliance on short-term funding," explains Jonathan Jackson, Killik's head of Equities."At the current rating of 6.5x 2012 earnings, with the potential for upside surprises, Lloyds looks very attractively valued. In addition we expected a return to dividends by 2012, with a 4% yield. We retain our Buy recommendation," Jackson said.