The banks in any economy are the funding pillars of growth. UK banks are no exception. In 2022, the UK banks witnessed a shaky ride on the stock market amid growing geopolitical pressures and an upcoming recession. The banks are currently operating in an environment of rising interest rates along with the additional burden of growing bad debts.
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Despite a dull performance in the stock market, banking giants Lloyds Banking (GB:LLOY) and Barclays (GB:BARC) are among the favorites of analysts. These banks are among the “big four” in the UK. These banks are also known for their stable dividend returns to their shareholders.
The TipRanks Stock Comparison tool can be an excellent resource for investors looking for stocks in any market or sector. Here we have considered parameters such as analyst rating, target price, and dividend yield.
Let’s see what the analysts’ views are on these stocks.
Lloyds Banking Group
Lloyds Bank is the largest financial institution in the UK, serving more than 25 million customers. The group’s services range from personal to commercial to international banking. The bank has more exposure to the UK market and is directly related to the ups and downs in the economy.
The shares are still not fully recovered after their fall at the start of the pandemic. After some momentum, they were again hit by recession fears. YTD, the stock has been trading down by 5%.
In its results for the nine months that ended in September 2022, the bank posted robust numbers depicting its growth story. The total net interest income grew by 12% to £13 billion, driven by net interest income, which increased by 15%. The bank also updated its full-year guidance numbers and now expects the net interest margin to be higher than 290 basis points, up from the current level of 284 bps.
Charlie Nunn, the chief executive of the group, said, “The Group’s resilient business model and prudent approach to risk position the Group well to face the current macroeconomic uncertainties while generating enhanced returns for our shareholders.”
The analysts are bullish on Lloyds Bank stock, as the solid financial health and lower share prices make the stock more attractive.
Citigroup analyst Andrew Coombs has the highest target price for the stock at 105p, with an upside potential of 133%. Coombs is a four-star-rated analyst with an 86% success rate on Lloyds stock. Coombs believes in the encouraging outlook of the bank and is impressed by the expectation-beating results.
Is Lloyds Bank a Good Stock to Buy?
Overall, Lloyds has a Moderate Buy rating based on 10 recommendations on TipRanks. The average LLOY target price is 64.10p, which has an upside potential of 43%.
Barclays PLC
This global bank offers its financial services across the U.S., Europe, India, China, and others. This provides an edge to Barclays in terms of its income diversification.
In its third-quarter results for 2022, Barclays posted a pre-tax profit of £2.0 billion, slightly above expectations. The bank’s total income increased by 17% year-on-year to £6.4 billion. The numbers were well supported by improved business in the CCP (consumer, cards, and payments) and fixed-income segments.
This year, the stock has fallen by 19% but has not lost the confidence of analysts. Recently, Martin Leitgeb from Goldman Sachs maintained his Buy rating on the stock at a target price of 250p, indicating a growth of 60%.
Four-star-rated analyst Jason Napier from UBS suggests 68% growth in the share price with a target price of 262p. He said, “I like the UK banks for rate gearing, resilient credit quality, and premium capital distributions.”
Barclays Stock Forecast
According to TipRanks’ analyst consensus, Barclays stock has a Moderate Buy rating. This is based on nine Buy and four Hold recommendations.
The BARC target price is 236.3p, which shows a huge scope for growth at 52%. The target price has a high forecast of 310p and a low forecast of 160p.
Conclusion
Both banks fundamentally operate at a high level based on their financial performance and earnings outlook. The full support from the analysts also implies their faith in the bank’s underlying business.
These banks have shown great success in recovery with high cash reserves and could be a perfect addition to the portfolio. Also, their high dividend yield makes them suitable for income investors as well.
