Jefferies upgrades Lloyds, sees "meaningful" dividend this year

Shares in Lloyds Banking Group were given a lift on Wednesday by analysts at Jefferies who said they see a better reward/risk balance at the lender, upgrading the stock from 'underperform' to 'hold'.The broker raised its target price on Lloyds from 69p to 88p but refrained from taking a more positive stance, saying that upgrades to consensus earnings expectations "appear hard to come by"."A progressively rising dividend (4.2p in 2017 from 0.75p in 2014) should provide support for LLOY's premium price-to-tangible book value (P/TBV) valuation, despite a persistently material gap between so-called 'underlying' and statutory earnings and lack of earnings upgrades," Jefferies said."Reward/risk is no longer asymmetric to the downside and we move to 'hold' as a result."Lloyds has underperformed the Stoxx 600 Banks index by 9% since October 2014 but Jefferies reckons this underperformance should stop now that the stock's premium P/TBV valuation is "backstopped by a dividend that should rise progressively, attracting income investors along the way". The broker said it now sees a "more meaningful dividend in 2015".The shares were up 2.1% at 79.93p by 10:37.Lloyds also received a boost from Morgan Stanley on Wednesday, which named the bank as one of its most preferred in Europe.