Proactive Investors - Lloyds Banking Goup PLC is Citi's favoured UK banking play after reviewing the sector ahead of first quarter numbers.
The broker expects the focus to again be on net interest margins (NIM) following conservative 2023 guidance by UK domestic banks and the recent move down in Fed forward curves.
But it does do not expect any major earnings surprises in the numbers and predicts outlook commentary to reassure on NIM and the cost of risk.
Citi pointed out recent events are also likely to see even greater attention placed on deposit flows, which it expects to prove more resilient than in the fourth quarter of 2022.
The broker also expects HSBC to commit to buybacks, which could act as a positive catalyst.
“We remain overweight UK banks, with a preference for domestic banks over international banks.” Citi said.
Lloyds Banking Group PLC (LON:LLOY) remains its preferred play in the sector (Buy), followed by Natwest (LON:NWG), Barclays PLC (LON:BARC) (Buy), Virgin Money (LON:VMUK), (Buy), HSBC Holdings PLC (LON:HSBA) (Buy) and Standard Chartered PLC (LON:STAN) (Neutral).
Lloyds, Barclays and NatWest were all over 1% higher on Tuesday.