Charles Stanley downgrades Lloyds; cites PPI headwinds and valuation

3rd Aug 2015 11:33

(ShareCast News) - Charles Stanley downgraded Lloyds Banking Group to 'hold' from 'accumulate', citing tax and PPI headwinds.It also said that with the shares trading on a premium rating of 1.6x 30 June 2015 tangible book value, material near-term upside may be limited.However, the brokerage still sees a total return opportunity of over 15% from current levels on an 18-24 month view. It said that with dividend payments having resumed and management focused on pursuing a "low cost, low risk, customer focused" business model, there is strong potential for the company to become a solid income stock over the coming years.Charles Stanley said that as with the full-year 2014 results, the interim results have shown a good underlying performance but statutory profits were hampered by further significant legacy misconduct charges and other one-offs."The underlying profit improvement has again been mainly been derived from lower loan losses which could reverse in a more challenging economic environment," it said.The brokerage pointed out that she shares fell 3% in the day of the results despite the 6% underlying pre-tax profit beat, amid disappointment over the hefty PPI and other misconduct charges.At 1040 BST, Lloyds shares were up 0.8% at 83.82p.