Investec sees solid progress at Lloyds at Q2 beat

31st Jul 2014 11:00

Better-than-expected second-quarter results from Lloyds Banking Group have prompted Investec to repeat its 'buy' recommendation for the stock."The market has, (quite rightly in our view), taken disclosure of Lloyds' 'reprehensible' LIBOR manipulation and (immaterial) £0.2bn fine in its stride," said analyst Ian Gordon. "What drives the share price is the operational performance, and today's Q2 2014 results show (we think) further solid underlying progress."Lloyds reported an underlying profit of £2.02bn, up from £1.80bn the year before and some 13% ahead of the consensus estimate of £1.78bn.Gordon said that impairments and costs came in below forecasts, while income was slightly better. In particular, the drop in impairments to £327m from £431m was 39% better than analysts' estimate of £533m.Meanwhile, he said: "The list of 'below the line' items is long, but for us a modest PPI top-up of £0.6bn offers relief rather than alarm."With cumulative PPI bill now above £10bn, Gordon said that current provisions "will now prove adequate". "If we are wrong, any incremental change is now likely to be small".Investec maintained an 85p target price for the stock.However, despite the positive comments, the shares were down 2.7% at 74.3p by 11:29.BC