Proactive Investors - Barclays (LON:BARC) continues to see near-term pressures on net interest income as Lloyds Banking Group PLC (LON:LLOY) works through "peak deposit and volume pain," but ultimately looks set for stability in earnings longer term, given a sizable building hedge tailwind.
The broker has trimmed its 2024 and 2025 EPS forecasts by 2% but remains upbeat on the stock reiterating an overweight rating and 70p price target.
Barclays was commenting after half-year numbers from Lloyds on Wednesday.
“Despite upgraded FY23 net interest margin (NIM) guidance we continue to see a softer near-term outlook for NII in 2H and into 2024, versus consensus, driven by ongoing pressure on deposit volumes, mix shift and higher funding costs, alongside narrowing mortgage margins.”
It forecasts NIM of 3.13%/3.08%/3.18% across 2023/24/25 compared to the company compiled consensus of 3.12%/3.09%/3.10%.
On bad debt provisions, Barclays noted while the impairment charge was heavier than expected this was driven by an £84mln macro economic overlay due to revised assumptions for higher rates and weaker house prices.
“Adjusting for this, underlying impairments of 29bp (as a % loans) were steady q/q and represent resilience amid an uncertain backdrop”, it pointed out.