(MENAFN- ProactiveInvestors - UK) Lloyds Banking Group PLC (LON:LLOY) is pursuing the right strategy, but it cannot escape the competition.
That's the opinion of the top-ranked team at Goldman Sachs, which moved the High Street lender to 'sell' – in fact the stock is on the pan-European sell list.
The threat, according to Martin Leitgeb and his colleagues, is posed by HSBC PLC (LON:HSBA) and the challenger banks.
The former first: The Goldman team reckons the Hong Kong and London-based clearer will deploy 'significant excess deposits' into the mortgage market, a big earner for the Lloyds.
At the same time, the mid-tier lenders will eat into the bank's book of home loans following the release of the Term Funding Scheme.
'We view Lloyds' margin maintenance strategy as optimal,' Goldman said in a note to clients.
'Nevertheless, we believe increased competition will have a significant impact on profitability.'
The shares, off 6% in the year to date, fell 4% in afternoon trade to 53.85p.
Goldman's 12-month price target is 50p.
The jury is out on Lloyds, according to the Broker Forecasts site.
Of the 16 analysts polled, eight are currently 'buyers' of the stock, while the remainder are either 'sell' or 'neutral'.
The consensus price target is currently 68p, just over 15p, or 30% above the current share price. That said, it has tracked down from around 86p in the last six months.
The FTSE 350 Banks Index lost around 2% or £22bn as the sector was dragged lower by the travails of Deutsche Bank, where the probability of default has reportedly jumped by 20%.
The German lender is embroiled in an £11bn battle over the alleged mis-selling of mortgage-backed securities.
Back here in the UK, Royal Bank of Scotland PLC (LON:RBS) fell 3% and Barclays PLC (LON:BARC) lost 2.5%.
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