Repeating a ‘buy’ recommendation the bank says Lloyds is the preference in the sector and its forecasts are some 15% above market consensus.
“We expect strong deposit growth; rebounding consumer credit; and rising interest rates to lead to substantial growth in UK net interest income in the next two years which is not captured in consensus nor current valuations,” analyst Robert Noble said in a note.
The upbeat rating comes as new chief executive Charlie Nunn has had his feet under the table for just a couple of weeks, after succeeding Antonio Horta-Osorio in August.
It also comes as the UK authorities mull potential changes to these banking sector rules which could relax ‘ring-fencing’ rules that keep their retail banking business separate from the rest of their business.
UK banks are seen as being at a disadvantage to US and EU lenders, where rules are seen as less tight.
The ring-fencing rules were constructed in the wake of the 2008 credit crunch to protect customers’ money in the event of bank fails, but were not completed and fully enforced until 2019 when GBP1.2 trillion of core deposits was secured in ring-fenced banks.