Citi removes Lloyds from ‘EMEA Focus List’, keeps at ‘buy’

Citi removed Lloyds Banking Group from its ‘EMEA Focus List’ on Friday as it pointed to headwinds in the second quarter.

"We have a buy rating on Lloyds Banking Group and on a 12-month view we see significant value in the stock," it said.

"We see re-rating potential in the long-term, trading on 0.85x P/TB for circa 14% consensus 2023 return on tangible equity (Citi estimates circa 17%).

"However, we note headwinds in the second quarter relating to deposit pricing changes, ongoing deposit mix-shift, absence of structural hedge maturities and ongoing mortgage margin compression - which has been more acute than peers - which could weigh on near-term earnings momentum."

Citi’s revised top picks for EMEA banks for the second half of 2023 are BBVA, Intesa and NatWest, replacing Lloyds.