Broker tips: Ibstock, Lloyds Banking

Analysts at Deutsche Bank lowered their target price on brick maker Ibstock from 170.0p to 150.0p on Thursday following the publication of the group's third-quarter trading update.

Deutsche Bank said although its pre-tax profit forecasts for Ibstock remain "largely intact" this year, it sees the market backdrop as being likely to "remain challenging" for some time, with domestic brick deliveries down 30% year-to-date.

"This leads us to make material downward revisions to our 2024E and 2025E forecasts," said DB. "We leave our 2023E PBT forecast intact (circa £72.0m), but make major downward revisions to our 2024E and 2025 estimates. Reflecting few signs of recovery in the new build residential space, we make significantly lower volume assumptions, the key driver of our revised estimates."

Deutsche Bank, which has a 'hold' rating on the stock, added that for 2024, it now forecasts pre-tax profits of £51.0m, significantly lower than its previous estimate of roughly £81.0m, and £57.0m for 2025, down from £87.0m.

Analysts at Berenberg reiterated their 'hold' rating and 58.0p target price on financial services giant Lloyds Banking Group on Thursday, stating it still sees better opportunities elsewhere.

Berenberg said that while Lloyds' recent third-quarter results "did not differ materially from consensus", it thinks the near-term outlook for net interest income remains constrained.

Berenberg also noted that retail savings balances now account for 64.6% of Lloyds' retail deposits, a roughly 130 basis point increase versus Q2 2023. The effect of this change in mix, alongside the increasing cost of these deposits, has "more than offset benefits" from higher interest rates since the final quarter of 2022. Given expectations for little or no further Bank of England interest rate hikes, Berenberg believes that rates offered on new savings will be unlikely to "increase materially".

Looking ahead, the German bank reckons dynamics in the deposit market will likely create a diminishing headwind and be complemented by greater support from the reinvestment of hedge assets and more favourable mortgage pricing and volumes.

"Lloyds' 14.6% common equity tier 1 ratio is circa 110 basis points above its target. Given this, and Lloyds' strong capital generation, we forecast an average total annual yield (dividends plus buybacks) of circa 13% during the next three years," said Berenberg.

"Trading on 0.8x total book value versus a circa 15% return on tangible equity, Lloyds is not expensive. Our 58.0p price target for Lloyds values the bank on circa 1.2x total book value. We, nevertheless, retain our preference for Barclays ('buy') and NatWest ('buy') given these banks' superior valuation support, yield and growth."