Broker snap: RBS downgrades Lloyds from buy to hold

RBS has downgraded UK lending giant Lloyds Banking Group from buy to hold, saying that there appears to be a lack of catalysts for the shares in the near-term."Lloyds [return on equity] recovery story is rapidly becoming a six-year journey. Given what looks to us like an overambitious top-line strategy, a tough economic backdrop, regulatory uncertainty and limited repatriation of capital until 2015, we see little potential for the shares to achieve a sustainable re-rating in the next 12 months," said analyst Asheefa Sarangi and Ian Smillie.The broker notes that Lloyds recently said that it intends to focus on other operating income (OOI) as its main top-line growth through to FY14, but "given that we expect rates to remain 'lower for longer', we do not see top-line growth picking up until FY13."RBS thinks that the full delivery of the Lloyds investment case is unlikely to unfold before 2015, and slashes its earnings forecasts for FY11-13 by 48%, 29% and 29%, respectively. "The cuts are primarily driven by our expectation of sizeable one-off items and lower revenues as Lloyds' OOI-driven strategy struggles to materialise and operating conditions remain unsupportive."As such, the broker downgrades its rating and cuts the target price by over 40% to 47p, from 80p previously.Shares in Lloyds dropped 3.2% to 43.57p at 11:29 on Friday morning.BC