Barclays lists Lloyds among its preferred names
By Alexander Bueso
Date: Friday 08 Oct 2021
(Sharecast News) - Analysts at Barclays believe that UK banks are among those poised to outperform, alongside lenders in France, Netherlands, Austria and the Nordics, with Lloyds being one of their preferred names in the space thanks to its high profitability.
Spanish and German banks on the other hand were seen as more likely to underperform while they remained neutral towards Italian, Irish, Swiss and Belgian names.
Key to their call, while all banks would benefit from interest rate hikes, some where better placed to deal with the risks that might arise, namely: pressure on their net interest margins, less support from volumes, and cost inflation.
Those risks, the analysts said, would bear down most heavily on lenders with lower profitability and capital buffers.
Yet Lloyds, for one, was already delivering a return on tangible equity that was above its cost of equity and had an "ample" capital buffer.
The importance of all of the above lay in the fact that the broker's preferred names were still sporting a dividend yield of approximately 7% and offering a total return of about 8%, against a sector-average yield for 2022 closer to 5.0% and total returns of 6.0%.
Given that those lenders' return on tangible equity was seen a sustainable and because of their distribution capacity, the analysts expected their shares would re-rate.
Barclays' other preferred names were ABN, Intesa San Paolo, and SEB.
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