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UK bank stocks have been lighting up the FTSE 100 this year. Lloyds (LSE: LLOY), for example, has seen its share price surge around 50%. Can these shares keep climbing?
Let’s take a look at City analysts’ share price forecasts for Lloyds, Barclays (LSE: BARC), and HSBC (LSE: HSBA) to see what they think.
HSBC
Let’s start with HSBC because this is one of my favourite bank stocks. I like it because it’s focused on the high growth areas of Asia and wealth management.
Currently, the average analyst price target here is 968p. That’s about 5% higher than the current share price.
Now, that projected gain isn’t so exciting. However, the stock does have a 5.5% dividend yield, so investors could be looking at total returns of more than 10% over the next year if the price target was to be achieved.
Personally, I can see the target being hit and I reckon the shares are worth considering today. Tariffs and losses in China are risks. However, with the stock trading on a price-to-earnings (P/E) ratio of just nine, I like the risk/reward skew ans think it’s worth further research.
Barclays
Moving on to Barclays, this stock’s grown on me recently. Because with its exposure to investment banking and trading, I reckon it’s well placed to benefit from both a pick-up in capital markets activity (which we are seeing right now) and increased volatility in the financial markets (also what we’re seeing).
Zooming in on analysts’ forecasts here, the average price target is 390p. That’s about 7% above the current share price of 363p.
The yield on the shares is about 2.4%. So again, investors are potentially looking at solid returns in the medium term (if forecasts turn out to be accurate).
I reckon the price target of 390p is achievable and I believe the stock‘s worth considering. Because right now, it looks cheap on a P/E ratio of 8.7 and as I said above, the bank has multiple growth drivers.
That said, an economic slowdown in the US or UK is a risk here. As is a slowdown in investment banking activity.
Lloyds
Finally, turning to Lloyds, the average price target here’s currently 88.6p. That’s about 8% above the current share price.
I wonder if we may be about to see the average price target climb though after the recent Supreme Court ruling on car finance commissions went largely in favour of the banks? Since the ruling, a number of brokers have become more bullish on Lloyds with Morgan Stanley hiking its target price from 95p to 100p.
Personally, I’m not so bullish on Lloyds at present. For a start, it’s up a lot this year and now trades on a P/E ratio of 11, which I think’s fair value.
Secondly, it’s very exposed to the UK economy (which remains shaky). And unlike other major banks, it doesn’t have much exposure to investment banking or trading.
Of course, the shares could keep rising from here. After all, they’re in a strong uptrend right now.
However, I think there are better shares to consider buying.
