With the sector up 12% so far in 2021, of which June and July saw falls of 7% and 2% respectively, analysts at the Swiss investment bank said they “continue to have a positive view”.
As well as the improved UK economic and rate outlook, Credit Suisse said UK bank valuations “are cheap relative to history” and relative to European counterparts.
What’s more, the analysts have a higher forecast than the market for 2022-23 earnings, based on their view of the current yield curve for margins and recovered returns.
Lloyds is the top UK pick and the analysts have revised earnings and capital forecasts and target price positively during the current earnings season and subsequently.
Bank of England data released for June showed better new business lending, though mortgage margins are expected to have continued to moderate in July, while bank funding data indicated that aggregate credit card balances have not yet returned to growth in June, with Barclay’s card balances down 0.5% m/m and Lloyds down 1.2%.
“Repayment rates remain higher than average and travel spend is yet to return, so we would expect improvements in sequential trends with further lifting of restrictions,” the analysts said.
The target price for Lloyds was nudged up to 61p from 60p, with the rating kept at ‘overweight’.
UBS also upped its target for Lloyds, to 55p from 54p.