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On Thursday, Citi analysts, led by Andrew Coombs, maintained a Neutral rating on Lloyds Banking Group Plc (NYSE:LYG) (LON:LLOY:LN) (NYSE: LYG), with a steady price target of GBP0.61. The decision follows Lloyds’ announcement detailing an expected net interest income (NII) uplift from its structural hedge, projected to be £1.2 billion in 2025 and £1.5 billion in 2026. These figures surpass market expectations and contributed to the stock’s notable performance, with LYG trading near its 52-week high and showing an impressive 52.82% return over the past year. According to InvestingPro data, the bank currently commands a market capitalization of $50.52 billion.
Coombs pointed out that the uplift in Lloyds’ NII is based on more optimistic assumptions than those of its peers. While acknowledging the potential for mid-single digit consensus earnings upgrades from 2026 onwards, Coombs also noted that the benefits in 2025 might be largely counterbalanced by additional mortgage spread pressure and costs, aligning with consensus projections. However, these challenges are expected to diminish by 2026. InvestingPro analysis shows the bank maintains a GOOD financial health score, with a P/E ratio of 9.45 and steady revenue growth of 7.75% in the last twelve months.
The analyst also highlighted a couple of contrasting points between Lloyds and its UK domestic peers. Firstly, the anticipated improvement in revenue and returns for Lloyds is more delayed, with a focus on 2026 rather than 2025. Secondly, Coombs expressed skepticism about the potential to upgrade 2026 targets for Lloyds based on the underlying assumptions, as compared to its competitors.
Citi’s stance on Lloyds reflects a cautious optimism about the bank’s future performance, recognizing the positive outlook for 2026 while also considering the near-term pressures and the ambitious nature of the bank’s forecasts relative to its peers. The reiteration of the Neutral rating indicates a wait-and-see approach as the market assesses the feasibility of Lloyds’ projections and their impact on the company’s financial trajectory.
In other recent news, Lloyds Banking Group Plc is undertaking a significant evaluation of the technical skills of its IT employees in the UK as part of a system upgrade, according to Bloomberg News. This initiative is part of a multiyear overhaul that may lead to job losses for hundreds of workers. Employees have been informed about the potential for job cuts and are expected to apply for new positions within the bank. The assessment of technical abilities is based on a test conducted last year, and the results will influence future roles within the company. This development comes after a company town hall where executives communicated the ongoing process to the staff. The overhaul reflects Lloyds’ commitment to modernizing its systems, although it poses uncertainty for its current IT workforce.
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