Lloyds And RBS Named The Best UK Bank Stocks

Investors with exposure to United Kingdom Banks may want to pay attention to a new research report by analysts at Credit Suisse, which lists firm's top picks.

Overall, there is "too much pessimism" about domestic-focused U.K. banks, especially given a view of a "soft Brexit," coupled with low growth, low unemployment and moderate interest rate increases, Credit Suisse's Claire Kane commented in a research report.

The following rating and price target changes were made on the London-listed banks and all price targets in British pounds:

• Barclays PLC (ADR) (NYSE: BCS) maintained at Outperform with a price target lowered from 250 pounds to 230 pounds.
• HSBC Holdings plc (ADR) (NYSE: HSBC) downgraded from Neutral to Underperform with a price target raised from 630 pounds to 650 pounds.
• Lloyds Banking Group PLC (ADR) (NYSE: LYG) upgraded from Neutral to Outperform with a price target raised from 75 pounds to 80 pounds.
• Royal Bank of Scotland Group PLC (NYSE: RBS) upgraded from Underperform to Neutral with a price target raised from 255 pounds to 275 pounds.

The Upgrades And Downgrade

Lloyds' revised stock rating is based on expectations for the bank to become a "likely winner" from a Soft Brexit with a 25-percent potential return over the next year, the analyst highlighted. Also, RBS's revised rating is justified on positive developments on capital, especially from IFRS 9 accounting standard changes but at the same time the timing and size of a Department of Justice fine remains uncertain.

On the other hand, HSBC's stock has outperformed its domestic peers but earnings revisions have lagged its peers at the same time. Also, a more cautious outlook on NIM expansion and capital return adds to the bearish story.

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