Peel Hunt analysts have upgraded their price target on Lloyds shares to 70p, up by 17 per cent, assigning a 'Hold' rating to the FTSE 100 lender.
The decision was informed by signs of strengthening income trends and a diminished sensitivity to interest rate changes, which are expected to bolster the bank's "top-line performance," as reported by .
Whilst the banking behemoth witnessed full-year profits dip by 20 per cent to £6bn in 2024, concerns were predominantly attributed to a £700m provision recorded in its annual report, destined for potential motor finance compensation claims.
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This recent allocation brings the total set aside for possible payouts to nearly £1.2bn, following a £450m reserve made in February 2024.
"We maintain our Hold recommendation but see potential for further appreciation as motor finance issues are resolved and strong financial performance continues," remarked analysts Robert Page, Stephen Payne and Stuart Duncan.
Amid ongoing anxieties regarding motor finance, analysts highlighted that such issues have not prevented the group from promising robust capital returns, estimating distributions of £13.7bn over the next three years, equivalent to roughly 30 per cent of the group's market capitalisation.
Analysts recognised that the announced £1.7bn share buyback in the bank's annual results has helped to alleviate investor "fear" about potential motor finance payouts disrupting the group's ability to distribute capital.
Page, Payne and Duncan concluded: "Future guidance assumes no further remediation for motor finance."
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Analysts have noted a downward revision in earnings per share estimates by 6.6 per cent due to "changes in the assumed phasing of motor finance issues."
Despite this, they maintained an optimistic view for the future, observing that favourable income trends are likely to boost earning expectations in the following years, which could be beneficial for Lloyds shares.
They pointed out: "Lloyds' revenues have been volatile and highly sensitive to the 海角视频 interest cycle."
Looking ahead, analysts are predicting a healthy revenue compound annual growth rate (CAGR) for Lloyds: "For the coming three years, we now forecast a revenue compound annual growth rate of around 6.5 per cent underpinned by rising structural hedge income, which is adjusting to a more normalised interest rate environment and accelerated growth in non-funded income."