Newspaper article The Evening Standard (London, England)

Broker Puts a Damper on High Street Banks

Newspaper article The Evening Standard (London, England)

Broker Puts a Damper on High Street Banks

Article excerpt


FORGET any ideas that shares in the big High Street banks have beenoversold, having seen their value more than halved since the start of lastyear.

That is the advice of Credit Suisse, which says it is too early to start buyingthe shares and warns there is still scope for an increase in mortgage riskweights. The broker has raised Royal Bank of Scotland , 3p dearer at 244 1 / 4p, from underperform to neutral but cut its target from 350p to 285p. It hasdowngraded Lloyds TSB , down 7 1 / 4 p at 386 1 / 4 p, from neutral tounderperform and slashed its target from 460p to 345p, claiming the ratinglooks expensive.

It says Lloyds' earnings are more exposed to an economic downturn than mostother banks because of its UK retail arm, small-mid corporate and commercialproperty exposure. Lloyds' relative advantage over the sector has also beensignificantly reduced following a combination of rights issues by other banksand the Bank of England's decision to pump money into the system in the shapeof cheap loans.

Credit Suisse sees RBS's capital ratios faring better than average if adownturn occurs with its tangible net asset value protected.

It continues to rate Alliance & Leicester , 1 1 / 2 p cheaper at 425 3 / 4 p,and HBOS , 4 1 / 4 p higher at 437 1 / 4 p, at underperform and has lowered itssights on their price targets from 440p to 390p and 570p to 415p respectively.Barclays , 4 1 / 4 p better at 395p, is rated neutral, with its target droppedfrom 570p to 415p.

Shares generally posted modest gains, with investors taking their lead from apositive performance by Wall Street overnight. In another day of thin tradingthe FTSE 100 index rose 29.3 to 6087.8.

Supermarkets group WmMorrison stood out with a rise of 6 1 / 4 p to 291 1 / 2 pafter Credit Suisse moved from neutral to outperform and tweaked its target 20phigher to 340p on the back of profits from the manufacturing division.

JPMorgan has downgraded First- Group, steady at 514p, from overweight toneutral to reflect a dearer-thanexpected debt refinancing plan. …

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