UBS Upgrades Lloyds to Buy, Says Shares Undervalued Despite Solid Quarter

UBS upgraded Lloyds Banking Group (LON: LLOY) to Buy from Neutral and raised its price target to 115 pence from 110 pence in a note on Thursday, arguing the UK lender is undervalued at current levels despite posting a first-quarter report that met market expectations.

The upgrade came a day after Lloyds reported results for the three months to March 31, 2026. UBS acknowledged the quarter included provisions for a weaker macroeconomic backdrop and car residual values, but said the bank is performing well and growing strongly.

Lloyds shares had fallen 1.5% on Wednesday following the results, before rebounding approximately 2.7% on Thursday to 99.69 pence after the UBS upgrade. The stock remains up about 1.5% year to date.

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The first-quarter results showed statutory profit before tax of £2.0 billion, up from £1.5 billion a year earlier.

Underlying net interest income rose 8% year over year to £3.6 billion, supported by a banking net interest margin of 3.17%, up 14 basis points annually.

Underlying other income climbed 11% year over year to £1.6 billion, while operating costs fell 3%. Return on tangible equity came in at 17.0%.

Lloyds reiterated its full-year 2026 guidance, including underlying net interest income expected to exceed £14.9 billion, a cost-to-income ratio below 50% and return on tangible equity above 16%.

Group Chief Executive Charlie Nunn said the company is “building strategic momentum during the final year of our current plan” and expressed confidence in delivery for the year ahead.