UK consumer activity remains strong and mortgage momentum is robust, albeit with signs of normalisation
PLC’s () and PLC’s () target prices were increased by analysts at Barclays based on the latest data readouts from the UK economy.
Tracking various sources of near-real-time data, the analysts said that despite concerns about new COVID-19 variants, UK consumer activity remains strong, driven by recovering non-essential spending.
Mortgage momentum is also robust, albeit with “some signs of normalisation”, with applications in May down roughly 10% on the preceding strong month and new business rates continuing to drift lower.
“Consumer credit remains subdued, however, with the outlook for credit cards uncertain given a number of headwinds,” they added.
With bank deposit inflows continuing at pace, as well boosting banks’ structural hedges, the analysts said they also see “potentially significant implications for banks’ capital requirements, and consequently the longterm outlook for growth/competition”.
The asset quality backdrop also remains benign for now, the analysts noted, with corporate insolvencies at historically low near-zero levels.
Lloyds’ price target was nudged up to 60p from 55p and NatWest’s to 220p from 200p. Lloyds is rated ‘overweight’ and NatWest at ‘equal weight’.