The discount embedded into Lloyds Banking Group’s shares has proved difficult to budge. At worst investors fear that the lender could be set for a wave of toxic debts as borrowers buckle under the cost of living pressures; at the least, the market suspects a slowdown in new lending will materialise.
A rise in returns guidance for the second time this year indicates that investors could be overly cautious. Higher interest rates and better-than-expected loan default rates mean returns on tangible equity, a key profit measure, are expected to come in at about 13 per cent this year, ahead of initial guidance of 10 per cent given in February.
Executing on that improved profitability guidance could help close the gap between the share price
