Lloyds Banking Group (1K) | Buy Buy | Lingering structural hedge tailwind

Research evidence excerpt

Lloyds Banking Group (1K) | Buy Buy | Lingering structural hedge tailwind

c.80% for 2027. The Consensus EPS 10.28 12.19 14.10

reinvestment rate was c.3.9% in Q1. Management will pre-hedge incrementally for FY to 31/12 (GBP) 12/26E 12/27E 12/28E

further value and concentration-risk reduction. Further notional growth remains P/E adj. and fully diluted(x) 9.6 8.3 7.3

possible this year, subject to deposit performance. P/BV (x) 1.6 1.4 1.2

P/TBV (x)

PCA balances ended Q1 at c.GBP103bn, up c.GBP0.6bn QOQ despite seasonally Dividend yield 4.3% 4.9% 5.7%

challenging tax-year-end pressures showing structural positive trends in the RoTBV 17.3% 18.2% 18.3%

deposit franchise. RoE after tax 13.8% 15.1% 15.8% CET 1 ratio 13.2% 13.5% 13.1%

CB loans grew GBP2.8bn QOQ (c.3%), with C&I contributing GBP2.4bn and Cost income ratio 49.7% 47.2% 45.3%

BCB/SME contributing GBP0.4bn, the first quarter in which private-sector SME Net NPL ratio (on loans)

lending exceeded bounce-back loan repayments.

Capital generation of 41bps in Q1 leaves pro forma CET1 at 13.4%, 40bps above

the c.13.0% end-2026 target. Full-year capital generation is guided at >200bps.

The GBP1.75bn buyback is c.GBP700m executed and expected to complete in Q3;

the Group has committed to a H1 capital review alongside the 30 July strategy

update.

Nicolas PayenThe H1 2026 results event will include a new strategy update, expected to extend Equity Research Analyst

targets toward the end of the decade. +44 (0)207 621 5128

Deconstructing the forecasts npayen@keplercheuvreux.com

We raise our estimates by 5%/3%/3% for 2026E/2027E/2028E, respectively.

Valuation and investment conclusion

We raise our TP to 127p and reiterate our Buy rating.

Lloyds offers high NII visibility and strong operating leverage. The next catalyst will