Lloyds favoured by Barclays analysts among UK banks ahead of its Q1 results

Lloyds will unveil its first quarter results on Thursday, with the lender labelled the preferred UK bank stock by analysts at Barclays ahead of its latest set of earnings.

Lloyds will unveil its first quarter (Q1) results on Thursday, with the lender labelled the preferred UK bank stock by analysts at Barclays ahead of its latest set of earnings.

Analysts at Barclays reiterated their ‘overweight’ rating for Lloyds in April based on the bank having strong pre-provision earnings and the stock being relatively cheap as a result of the Covid-19 crisis weighing heavily on the banking sector.

‘Covid-19 potentially presents an opportunity to buy these strong franchises at low valuation,’ Barclays said in a note.

Analysts at Barclays downgraded its target price for Lloyds to 50p a share in April, implying 51% increase from the 31p level it is trading at as of 15:00 (GMT) on Tuesday.

PRA requests UK banks suspend dividend

Much to the disappointment of shareholders, Britain’s largest lenders complied with guidance from the Bank of England (BoE) and suspended dividend pay-outs in 2020.

The Barclays, Lloyds, Royal Bank of Scotland, HSBC, Santander and Standard Chartered all said that they would cancel their dividends for the 2019 financial year and agreed to refrain from making any pay-outs to shareholders in 2020. The banks even promised to cancel any share buyback initiatives too.

The Prudential Regulation Authority (PRA), the supervisory division of the BoE, welcomed the dividend cancellations and not having to take any formal action against any UK banks.

The PRA hopes that by keeping cash on lenders balance sheets, rather than in shareholders pockets, it will help the industry offset some of the impact of the Covid-19 crisis.

The regulator also expects banks not to pay any cash bonuses to senior staff over the coming months.

How much does it cost to buy UK shares with IG?

There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).

Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.

Cost to get exposure to Lloyds stock

Spread betting CFD trading Share dealing
Action Buy £160 per point Buy 16,000 share CFDs Buy 16,000 shares
Cost required to open £2000 £2000 £10,000
Total fees £20.88 £20.88 £16

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Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.

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