The broker has ‘buy’ recommendations on both Barclays, with a price target of 180p, and NatWest (200p pt) following their recent results.
Bad debts dominated the recent reporting season, but by and large, outcomes here have been better than expected, Berenberg said.
Strong balance sheets among the UK banks have also enabled them to “front-end load” bad debt charges, it says, making for a potentially very strong profits rebound this year.
“Recent developments related to Brexit and vaccinations provide further support and, in our view, can enable loan losses to normalise faster than consensus.”
UK banks have also benefited from strong mortgage growth and pricing, while the Bank of England has swerved negative interest rates thus far.
In addition, Britain’s banks have been allowed to resume dividends and near-term yields should be attractive to investors, Berenberg added.
Today, Barclays was trading at 159.7p and Natwest 183.75p.