Shore Capital has reiterated its ‘sell’ recommendation on Lloyds Banking Group PLC (LSE:LLOY) with a 91p target price, arguing that a strong first-quarter performance is already reflected in a share price that has gained 34% over the past year.
The broker pointed out that the stock is trading at approximately 1.7 times first-quarter tangible net asset value, a level it considers stretched given the risks still facing the group.
Chief among those is the prospect of further government intervention on bank taxation, which Shore said could undermine the sustainability of Lloyds’ elevated returns on tangible equity.
ShoreCap also raised an eyebrow at the group’s more cautious macroeconomic assumptions, noting that management had updated its economic scenarios to reflect a darker outlook even as it nudged full-year net interest income guidance marginally higher to above £14.9 billion.
UBS takes a more sanguine view, maintaining a ‘neutral’ rating with a 110p target and flagging several operational positives that Shore’s bearish framing plays down.
The Swiss bank highlighted loan growth of 1% quarter on quarter, led by corporate and institutional banking and UK unsecured lending, and drew attention to an upgrade in structural hedge income guidance.
Lloyds now expects hedge income to exceed £7 billion in 2026, growing by more than £1.5 billion year on year, rising further to above £8 billion in 2027.
On the numbers themselves, statutory profit before tax came in at £2 billion for the first quarter, 10% above the £1.84 billion consensus estimate, with the outperformance driven by tighter cost control and a materially lower impairment charge of £295 million against expectations of £380 million.
The group took a £101 million net charge to reflect the economic consequences of the conflict in the Middle East, comprising a £151 million gross provision partially offset by a £50 million release of tariff reserves.
Chief financial officer William Chalmers said the bank was assuming a gradual de-escalation of hostilities, while cautioning that a prolonged conflict could weigh on UK growth and push unemployment higher.
On motor finance, Lloyds confirmed no fresh provision was taken in the quarter, offering some relief to investors who have watched the sector’s exposure to the scandal grow steadily since the Financial Conduct Authority launched its review.
The regulator has estimated the industry-wide cost of its redress scheme at £9.1 billion, a figure the Finance and Leasing Association said last weekend it would not challenge.
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