Lloyds Banking Group PLC returning to normal, says leading investment

The City’s abacus rattlers continued to upgrade their target prices for Lloyds Banking Group PLC (LSE:LLOY) in the wake of last week’s better-than-expected quarterly results.

The figures were largely flattered by accounting write-backs of charges taken at the start of the pandemic. The trend was the same across the sector.

Deutsche Bank reckons the black horse lender is ‘returning to normal’.

In a note to clients, it said Lloyds was one of its top picks in European banking. “We continue to believe that consensus does not reflect impending UK rate rises,” it added.

By 2023/24, Deutsche expects Lloyds “will be on the way to recovering most of the return on tangible equity lost due to Covid in 2020”, while delivering a yield in capital return of 7-9%.

The German bank rates the stock a ‘buy’ up to 60p. Goldman Sachs (NYSE:GS) also weighed in, upgrading its price target to 55p from 51p, but keeps its ‘neutral’ recommendation.

Of the 24 banks and brokers covering Lloyds, 16 rate the shares either ‘buy’ or ‘outperform’. Only one has a negative call on the stock, with the rest maintaining a ‘neutral stance’.

The average target price suggests the shares are undervalued by 13.5%. Analysts expect pre-tax profit for 2021 to be up year-on-year by 500%, albeit from a very low base.