New leverage ratios 'clear the overhang' for UK banks, says JPMorgan

JPMorgan Cazenove has welcomed the new leverage-ratio rules from the Financial Policy Committee (FPC), saying that the outcome for UK banks was better than the market had expected.Analysts reiterated their 'overweight' positions on Lloyds and Barclays, but kept 'neutral' ratings for RBS, HSBC and Standard Chartered.The FPC said on Friday that the UK's largest banks would need a leverage ratio - which measures the proportion of lending that is funded by equity - of 4.95%. However, when excluding a 0.9% 'counter-cyclical leverage ratio buffer' (CCLB) used during "boom times", it would be just 4.05%, towards the lower-end of the 4-5% range expected by the market.What's more, the FPC said that the full requirement comes into force in 2019, much later than the 2017 date some analysts had assumed.JPMorgan said that all of the UK banks already meet the minimum leverage requirements except Barclays, but the latter should reach the target within the first half of 2015."While the FPC's Leverage ratio calibration at 4.05% (ex CCLB) was lower than expectations baked into share prices, the practical implications for where UK banks need to manage their leverage ratio over the medium to long term are in line with our expectations," said JPMorgan analysts Raul Sinha and Vivek Gautam."With the clarity provided to the industry, we believe that UK banks under our coverage don't need material shifts in strategy to meet these requirements and are on track to be clear on capital requirements post the stress test (results 16 December) which bodes positively for dividends."