JPMorgan upgrades Barclays, downgrades Lloyds

"We continue with our relatively cautious view on European banks trading at 6.9x P/E, 0.8x TBV for 11.6% return on tangible equity in 2024E," it said.

"With our house view of a recession, JPMe provisions 13% above consensus expectations 2023-24E and historically banks underperforming when provisions increase and outperforming once provisions peak, we remain cautious.

"Our base case valuation is not expensive at 6.9x P/E 2024E; however, in our Stress scenario, we see the sector trading at average valuation of 12.7x P/E i.e. risk-reward is not as attractive assuming historic PE of 9x, in our view."

In a global context, JPM said it still prefers US money centre banks over European Banks post their underperformance in 2022.

JPM upgraded Barclays to ‘overweight’ from ‘neutral’ and lifted the price target to 220p from 180p, saying it was its new UK banks "top pick".

It downgraded Lloyds to ‘neutral’ from ‘overweight’ and cut Close Brothers to ‘underweight’ from ‘neutral’, reducing the price target to 1,120p from 1,240p.

It also cut Societe Generale to ‘neutral’ from ‘overweight’ and Bankinter to ‘underweight’ from ‘neutral’.