Broker snap: Consensus too optimistic about Lloyds, says Nomura

Nomura has reiterated its reduce recommendation and 35p target for Lloyds Banking Group ahead of the firm's full-year results due later this week."The investment case for Lloyds, like RBS, is driven by an assessment of the value and prospects of the core businesses and the potential exit and restructuring costs from non-core. Unlike RBS, we do not see any potential to release capital through divestures, and Lloyds has the least margin on the capital front to meet future regulatory requirements among the UK banks," the broker said.Nomura says that the outlook for both revenue and asset quality has deteriorated over the second half of the year, "which makes us more concerned about Lloyds given the balance sheet risks".The broker downgraded its rating for the bank from neutral to reduce last week saying that the shares are trading at the top end of their valuation range."Also, we still see consensus as too optimistic on pre-provision profits running into 2012. We remain cautious on the name going into the full-year results," Nomura added.BC