Source: TradingView Past performance is not a guide to future performance UBS's review of the results and various industry benchmarks point to some stability in conditions for the banks, although any recent suggestion that the squeeze on mortgage market profitability is easing appears wide of the mark. Despite the softer Q1 results, all UK banks have reiterated their return on tangible equity (ROTE) targets for 2019/20. UBS, however, thinks the market is expecting a material failure to deliver on these targets, meaning that Barclays, Lloyds and RBS are trading on between 6.6x and 7.9x current year earnings per share. Napier said:
"On our numbers, which assume that the banks fall short of their ROTE objectives, principally due to lower-than-planned revenues, Lloyds and Barclays are the sixth and seventh cheapest stocks in our coverage."Lloyds anticipates a return on equity figure of between 14% and 15% in 2019, compared with 12.5% in the most recent quarter. Its tight control of the business has already enabled a share buyback of £1.75 billion, alongside a dividend yield of above 5%. The recent announcement from regulators on the systemic risk buffer requirement for UK's ring-fenced banks should give Lloyds more room to move in terms of future shareholder returns. Some analysts think this could increase the capacity for share buy-backs by £1 billion in 2019. Napier, meanwhile, thinks RBS is capable of returning £6 billion in capital to shareholders in 2019, equivalent to around 20% of its market cap. He expects part of this capital to be devoted to an off-market repurchase of 5% of the company from the Treasury, taking the government's stake down to 57%. His price target for RBS is 290p, with Lloyds Banking Group priced at 75p and Barclays at 220p. These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.