Analysts Downgrade Lloyds Banking Shares Following H1 Results

Lloyds Banking Group (LON: LLOY) has faced downgrades from analysts at Citi, UBS and RBC Capital following the release of its H1 results. The firms lowered their ratings on the UK lender, citing concerns over profitability and valuation.

Citi analyst Andrew Coombs cut Lloyds Banking's rating to Neutral from Buy, with a 60p per share price target.

Coombs pointed out to investors in a research note that Lloyds was the only UK bank to miss on pre-provision profit in the second quarter, with the bank hit by higher operating lease depreciation. Furthermore, he said motor finance redress now looks set to remain an overhang until May 2025.

Away from Lloyds, Citi also said in its note that NatWest Group (LON: NWG) is now its top UK bank pick, replacing Barclays (LON: BARC).

Meanwhile, UBS analyst Jason Napier lowered Lloyds to Neutral from Buy, reducing the firm's price target for the stock by just 1p to 61p a share.

Napier told investors in his note that the bank's earnings were “broadly stable” after the Q2 results, highlighting the rising net interest income and good payouts. However, he acknowledged that the stock trades at a premium compared to the sector and local peers. That “premium valuation” was cited as the reason for the downgrade.

Finally, RBC Capital analyst Benjamin Toms cut Lloyds to Sector Perform from Outperform in a note following the results, maintaining a price target of 60p on the stock.

While Toms said Lloyds is a well-managed bank with favorable strategic positioning, he stated that they “have run out of runway in valuation terms,” and the downgrade reflects Lloyds shares hitting the firm's price target.