RBC Capital Issues Positive Report for Lloyds Banking, Sets Price Target at p95.00

Lloyds Banking received a Buy rating and a p95.00 price target from RBC Capital analyst Benjamin Toms. The analyst has a 5-star rating and an average return of 18.0%. The stock has a Moderate Buy consensus with a price target of p86.62, representing a 14.36% upside. Corporate insider sentiment is negative, with 117 insiders selling their shares over the past quarter.

Lloyds Banking Group (LON:LLOY) has received a significant boost following a key Supreme Court decision, which has led RBC Capital Markets to upgrade the stock to "outperform" with a new price target of 95p. The decision, announced on Friday, cleared a major overhang from the UK banking sector, rejecting claims that banks and car dealers were liable for "dishonest assistance" or "bribery" in how commissions were paid on car finance deals [1].

The ruling confirmed that car dealers act in their own interests, not as agents of the bank or the customer, thereby avoiding the harshest compensation outcomes that some investors feared. However, a statutory route for consumer redress under the Consumer Credit Act remains, where deals can be deemed "unfair" if commission size or sales practices mislead customers [1].

The Financial Conduct Authority will launch a redress scheme later this year, with the sector's potential compensation bill now expected to be £9–18 billion, a figure manageable compared to previous estimates [1]. RBC estimates that sector-wide redress costs could total £11.5 billion, with Lloyds potentially facing £1.6 billion in costs [1].

Despite the potential costs, analysts are optimistic about Lloyds' prospects. The bank's tangible book value could face a 1.5% hit, but its capital position remains strong, with a forecast CET1 ratio of 13.1% through 2027 [1]. RBC projects that adjusted return on tangible equity (ROTE) will rise to 17.9% by 2027 from 14.2% in 2025, while earnings per share (EPS) is forecast to grow to 12.29p in 2027 from 7.72p in 2025, around 8% above consensus [1].

The stock has a Moderate Buy consensus with a price target of 86.62p, representing a 14.36% upside [2]. Corporate insider sentiment is negative, with 117 insiders selling their shares over the past quarter [2]. However, RBC Capital Markets' analyst Benjamin Toms, who has a 5-star rating and an average return of 18.0%, believes Lloyds' deposit franchise strength, earnings resilience, and attractive yield profile make it well-placed to outperform UK peers into 2026 [2].

References:
[1] https://www.investing.com/news/stock-market-news/rbc-upgrades-lloyds-to-outperform-after-motor-finance-ruling-clears-overhang-4167244
[2] https://www.proactiveinvestors.co.uk/companies/news/1076018/lloyds-banking-group-after-supreme-court-ruling-clears-the-air-1076018.html