Citi assesses management’s 10% guidance upgrade, prior to any determination of the collective provision, likely reflects the improving macro outlook for the non-bank sector. The Buy rating and $8.50 target are retained.
Funding costs remain a tailwind, actual credit losses remain subdued and activity has broadened in the mortgage market, explains the broker. There are expected FY22 benefits from collective provisions, recent compression in RMBS spreads and improving volume growth.
Sector: Banks.
Target price is $8.50.Current Price is $7.60. Difference: $0.90 – (brackets indicate current price is over target). If LFG meets the Citi target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).
