The US broker sees margins rising due to the exceptionally strong mortgage lending market in 2021 which is being driven by cyclical as well as structural trends.
A recovery in consumer spending plus a strong motor finance marketcan give margins a further boost, said JPM, while in the medium-term there is the possibility of an interest rate rise at the end of 2022.
JPM has upgraded its earnings forecasts in 2023 for all of the UK domestic banks on the assumption rates do rise, but says Lloyds is most geared to the early phase of its margin recovery thesis with two-thirds of revenues from UK mortgages and consumer credit.
Natwest (LON:NWG) is more geared to the last phase or the rates upside while Barclays offers the most attractive mix of gearing to UK and US retail recovery, solid commercial profitability and capital returns and is its top pick.
Shares in Lloyds eased to 48.1p while Barclays rose slightly to 179.6p.