Citi reiterates sell on Lloyds, cuts target

The Financial Conduct Authority's consultation paper 16/20 released in August would see Lloyds book further charges linked to payment protection insurance mis-selling, analysts at Citi said.

Together with a likely swing into a pension deficit in the third quarter of 2016, that meant the lender would not pay out a special dividend, although the ordinary dividend per share would be held at 2.50p, analysts Andrew Coombs, Ian Sealey and Sujal Kumar said in a research report sent to clients.

They had previously expected Lloyds to pay a special dividend of 0.50p, while the consensus forecast was calling for an ordinary dividend of 2.6p and a special payout of 0.3p.

Only modest growth was seen thereafter.

Citi thus reiterated its 'sell' recommendation on the stock and lowered its target price from 53.0p to 48.0p, referencing the potential for extra PPI and pension charges, as well as falling net interest margins, subdued volumes and the restart of the UKFI government sell-down.