How will the election impact the RBS and Lloyds share prices?
The UK General Election is fast approaching, but how will it impact the share prices of British lenders like Royal Bank of Scotland and Lloyds?
The UK General Election will take place on December 12, with the pound surging to a six-month high last week after a YouGov poll predicted the Conservative Party would secure a majority of 359.
Berenberg upbeat about RBS and Lloyds this Xmas
Analysts at Berenberg believe that more domestically focused UK lenders like Lloyds and RBS could see short-term gains if the upcoming election proves to be ‘market friendly’ in a note to investors this week.
The Hamburg-based bank went on to say that it believes that Lloyds could outperform its rivals in the UK, while Barclays and HSBC, which both have large exposure to US and Asia, could struggle.
However, analysts at the investment bank were quick to point out that any gains Lloyds enjoys from the election will be short-lived, with RBS likely to benefit more over the long-term given the bank’s increased lending capacity.
Speaking more broadly about the sector, Berenberg analysts urged investors to exercise a degree of caution, with the headwinds facing UK banks this year likely to continue into 2020.
‘We believe headwinds from low interest rates and structural challenges facing investment banks remain poorly reflected in consensus and that cost inflation from the necessary investment in compliance and risk controls may be material,’ analysts said in the note.
Analysts optimistic for RBS but mixed about Lloyds
Analysts at HSBC, Deutsche Bank and Goldman Sachs all upgraded their target price for RBS in November, issuing targets of 230p, 235p and 285p respectively.
This year, RBS’ share price remains flat, up marginally on a year-to-date basis at 218p. However, based on that price, the three banks believe that the stock has a potential upside of between 5.5% and 30%.
Analysts following Lloyds are far more mixed about its price trajectory, with Goldman Sachs believing the stock is overvalued, reiterating its ‘sell’ rating and issuing a target price of 51p. Société Générale, however, is far more upbeat, reiterating its ‘buy’ rating and issuing a target price of 76p.
Lloyds closed at 59p on Tuesday. Based on that price, analysts believe the stock could trade -13% lower or rally as much as 28%.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Trade the general election with IG
- Hedge your weekday GBP/USD and FTSE 100 risk with our weekend offering
- Speculate on the increased volatility that surrounds a general election
- Go long or short with CFDs and spread bets
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.