Insider: directors predict recovery at Lloyds Bank and Haleon

Confidence that Lloyds Banking Group (LSE:LLOY) shares will recover from their recent 18% slump has been shown in the boardroom after two directors disclosed dealings worth £87,000.

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The most recent purchase was one of £47,000 by former Santander chief executive Nathan Bostock, who joined Lloyds as a non-executive director in August 2024.

His 4.1% yielding investment at 94.9p compared with the share price of 98.7p prior to last month's third-quarter results and the multi-year high of 117p set in early August.

The other buyer was former Direct Line Insurance chair Danuta Gray, who spent £40,000 in her first purchase of shares since being appointed to the board in July.

Lloyds shares have reversed to their lowest level since late March after guidance in the recent quarterly results fuelled City worries about higher levels of market competition.

The bank told investors that net interest income in 2026 is expected to be “modestly” greater than £14.9 billion, which was about £100 million below the consensus.

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The update and increase in the government's bank tax surcharge to 6% in the Autumn Budget prompted UBS to cut its earnings per share (EPS) forecasts for 2026-28 by between 2% and 7%.

While noting that the transcript of a conference call with management included the word “competition” 12 times and “competitive” another 18, UBS said it believed the share price had reacted too strongly to a more cautious narrative.

The bank added: “We don't think trading conditions are much worse than management expected. We believe that was confirmed in the call.

“A downgrade to consensus estimates that had risen too far is less troubling, in our view, than an operating environment in which the UK's biggest banks are finding pricing far weaker than they'd like.”

The bank cut its price target by 10p to 125p, leading to a forecast total return of 37%.

Bank of America moved down to 130p but said the fundamentals were still attractive as it backed Lloyds' ability to navigate a competitive landscape that has intensified noticeably in recent months, particularly on the deposit side.

Its new forecasts point to net interest income growth of about 6% for 2027 and 2028, which compares with about 10% in 2026.

BofA added: “We expect Lloyds management to be disciplined in its approach to growth, and continue to expect margins to grow through 2027.

“We also think Lloyds' scale and holistic retail franchise provides it with an advantage in a more competitive environment.”

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The use of structural hedges to smooth out interest rate volatility has been a powerful income tailwind for all domestic lenders, although Lloyds acknowledged the contribution has been offset by asset margin compression and a competitive deposit market.

Its banking net interest margin rose to 3.25% in the third quarter compared to 3.22% in the second quarter, representing a slowing pace of momentum.

Shore Capital said the presentation by management reinforced its long-standing concern that the substantial hedge tailwind cannot simply continue dropping through to the bottom line.

The bank, which has a Sell recommendation and 92p target price, said: “While near-term returns remain strong, we do not believe a return on tangible equity (RoTE) approaching 20% should be capitalised as sustainable given competition, potential for further taxation and the inherent cyclicality of bank earnings.”

Overcoming disappointment

A FTSE 100 finance chief has spent £25,000 on Haleon (LSE:HLN) shares after the company she serves as a non-executive director lost 15% of its value in one session.

Bláthnaid Bergin, who is chief financial officer of Sainsbury's and joined the board of Haleon in February 2025, made her investment after the consumer healthcare company downgraded revenue guidance for 2026.

Her dealings at 324p compared with February's share price peak of 411p and the 330p starting price when Haleon was spun out from GSK in July 2022.

The company's de-rating was triggered by its disclosure of organic revenue growth of 2.6% in the third quarter. This was short of the City consensus of 3.2% and prompted Haleon to update its guidance for the year to around 2.5%, from a previous range of 3-5%.

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Haleon highlighted softness in categories such as cough, cold and flu remedies, offset by strong performances in oral health and progress with its North America turnaround plan. The company's brands included Sensodyne, Centrum, Panadol and Theraflu.

Chief executive Brian McNamara said: “We are clear on where we need to improve and we are taking action to deliver stronger performance despite challenging markets.”

He allocated another £500 million to share buybacks as the company's high gross margin and progress on supply chain productivity has continued to underpin strong cash generation.

UBS said Haleon's quarterly sales growth has been, more often than not, disappointing since early 2025.

But it pointed out that the company appears well on track to report best-in-class 12% earnings per share growth this year and that sales growth excluding respiratory health has been a respectable 4% in the past seven quarters.

The bank, which has a price target of 478p, added that the recent de-rating had driven the group's 2027 price/earnings multiple down to 14 times for a 20% discount to the sector.

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However, Deutsche Bank said it believed the sales weakness has been the culmination of structural industry changes as well as poor strategic and operational execution. The bank has a Hold recommendation and 310p price target.

It thinks that Haleon needs a strategic reset: “From our perspective, the company has too much of what consumers need and not enough of what they want.

“The strategic decisions by the company to focus on EBIT growth and missing the growth of categories like hydration we think have been missteps and what would likely be more effective is a step up the cadence of innovation and perhaps more focus on “Consumer" and less on "Health".