Lloyds upgraded to 'buy' by HSBC

5th Jun 2015 07:35

HSBC upgraded Lloyd Banking Group to 'buy' from 'hold' and raised the target price to 103p from 87p."Though unchanged, our earnings remain 9-10% higher than consensus reflecting a more positive stance on margin," it said.The sell-down of the government stake has acted as a glass ceiling on share price performance, but will ultimately come to an end with a retail placing in the next 12 months, it added.HSBC noted that Lloyds offered investors a 15% return on tangible equity a level exceeded by only a handful of European banks.Evidence of intensifying competition in the UK mortgage market has raised justifiable concern about the sustainability of returns.However, management has raised margin guidance twice so far this year reflecting their capacity to lower the cost of liabilities whilst the possibility of rising domestic rates raise the prospect of further gains in 2016, said HSBC.HSBC maintains its 2015 earnings per share forecast at 8.5p and beyond that looks for 9p in 2016.