Lloyds Banking Group - Little earnings momentum; downgrade to ‘Neutral’

Davy Research
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Earnings sustainability, capital requirements and dividend capability were dominant themes in Lloyds Banking Group (LLOY) in 2017 and will likely remain so during 2018. We do not expect the increase in capital requirements to impact materially upon dividend capability due to the strong capital generation evident during 2017, and we expect a progressive dividend policy to continue. Yet, in our opinion, the stock is now approaching fair value and we downgrade to ‘Neutral’ with a price target of 72p.