Barclays ups target prices for UK lenders, 'cautious' on HSBC and StanChart

Barclays' analysts sounded a relatively confident note on the outlook for the main UK lenders despite the added uncertainty from renewed Covid-19 restrictions.

"Renewed restrictions add to an uncertain near-term outlook for UK banks," they said in a research note sent to clients.

However, while they lowered their estimates for bank earnings in 2021, those for 2022 were unchanged.

They also marked up their target prices for all the lenders mentioned in the same note.

In the case of Lloyds, they said that they were now in-line with the company compiled consensus estimate for earnings per share and 10% below it in the case of Natwest.

"We remain constructive in the medium term given a likely H2 economic recovery, improving profitability, rebuilding capital distributions, strategic actions, and undemanding valuations," they added.

Thus, their recommendation for Lloyds was unchanged at 'overweight', with the analysts further pointing out that the shares were trading on eights times' Barclays' 2022 estimate for its EPS.

European banks were changing hands on an average EPS multiple of 9.5 times while Virgin Money UK and One Savings Bank were on a multiple of about six times.

On HSBC and StanChart on the other hand, Barclays said it was "cautious" as their shares were on 11.5 an 10.0 times the broker's 2020 EPS estimates, respectively.

Barclays revised its target price for HSBC from 380.0p to 400.0p (Underweight), from 100.0p to 130.0p for Metro Bank (Underweight), from 150.0p to 165.0p for Natwest Group (Equalweight), from 460.0p to 500.0p for OneSavingsBank (Overweight), from 410.0p to 420.0p for StanChart (Underweight) and from 165.0p to 170.0p for Virgin Money UK (Overweight).