Morgan Stanley 'overweight' on Lloyds, Brexit outcome key valuation driver
By Alexander Bueso
Date: Friday 11 Oct 2019
(Sharecast News) - Analysts at Morgan Stanley reiterated their 'overweight' stance and 60.0p target price for shares of Lloyds on Friday following a meeting with the lender's chief, Antonio Horta-Osorio.
In a research note sent to clients, analyst Alvaro Serrano said Lloyd's boss had struck a "realistic tone", talking him through a mix of organic and non-organic growth initiatives.
"Brexit is the obvious uncertainty, but reassurance was given around cost levers and management provided some sensitivity on provisions," Serrano added.
The lender's "severe" planning scenario envisaged a jump in the rate of unemployment to a peak of 8,6% and a 33.0% slide in house prices.
"Assuming a timely policy response, they think it would still be manageable resulting in a £2bn delta in provisions according to their models, which presumably would be absorbed by the removal of the counter-cyclical buffer," the analyst explained.
Regarding opportunities for non-organic growth, Serrano highlighted the purchase of Tesco bank as a good example and noted that management did not rule out other such purchases, having pointed out to him that Sainsbury's bank was contemplating a similar divestment.
Wealth Management and Insurance remained key, with management aiming to become a top-3 player in five years' time.
"The JV with Schroders is now up and running, and they will launch the non-advice platform for the
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