RBC downgrades Lloyds, MSCI weighs Indonesia shift, analysts revisit Treasury

Nordea halts buybacks as ECB asks Nordea for more conservative credit-risk models

RBC Capital Markets analysts Benjamin Toms and Sherry Lin downgraded Lloyds Banking Group on Friday, citing intense competition in the U.K. deposit market that could pressure the bank’s net interest margin. The market for customer savings remained competitive through the third quarter, RBC said, and Lloyds’s higher loan-to-deposit ratio poses a challenge in that environment. RBC cut its 2028 pretax profit estimate for Lloyds by 6%, reducing both its net interest margin and loan growth estimates, lowered its rating to sector perform from outperform, and trimmed its price target to 115 pence from 124 pence. Lloyds shares fell 1.9% to 103.85 pence.

MSCI said it was considering a proposal to reclassify its Indonesia Indexes from Emerging Market to Standalone Market status, citing continued concerns about investability in the Indonesian stock market. “Market participants have indicated to MSCI that, to date, sufficient progress has not been observed consistently across the Indonesian equity market,” the company said. Despite announced reforms, “significant concerns remain around market dysfunction, including continued suspected coordinated trading behavior and lack of evidence of meaningful enforcement.” MSCI is taking feedback through April 2027 and will announce its decision by the end of June.

Afonso Borges, Julius Baer’s fixed-income research analyst, said a deeper correction in artificial intelligence-related equities could restore the diversification appeal of U.S. Treasuries. While stock-bond correlations have turned positive, an AI-led downturn would resemble a traditional negative demand shock, as weaker capital expenditure, softer hiring and declining household wealth weigh on spending and inflation. Reduced investment in data centers and related infrastructure could further ease demand for power, equipment and other constrained inputs, Borges said. Julius Baer recommends an overweight duration stance in intermediate-maturity bonds, noting that Treasuries could regain their defensive role if the AI correction deepens.

AlphaValue analyst Sylvain Perret wrote that Helsinki-based Nordea posted “good third-quarter results overall,” though earnings were slightly below consensus due to lower-than-expected trading performance and fee income. The key development was the suspension of buybacks in response to ongoing discussions with the European Central Bank, which is asking for more conservatism from Nordea on its new models that calculate credit risk. A clearer picture is expected in 2027. “We see low risks to the 2026 outlook overall but see no positive re-rating either,” Perret said. The Helsinki-based bank’s latest quarterly results showed corporate lending volume growth was high but mortgage demand remained weak amid competitive pressure, with a lingering impact on net interest margin. Fee income growth stayed strong, though decelerated a bit from the second quarter, while cost inflation remained disciplined. Nordea shares rose 1.1%.

Barclays analysts raised their flow and headline assets-under-management estimates for Man Group following the U.K. investment manager’s strong third-quarter update, which showed healthy flow momentum and robust investment performance. The bank raised its target price for Man Group to 400 pence from 365 pence and increased its forecasts for management fee pretax profit across its projection period by up to 5%. “With healthy flow momentum and strong investment performance, we continue to see upside potential at current levels and therefore maintain our overweight rating,” the analysts said. Man Group’s shares closed at 336.40 pence on Thursday.

Nomura analysts upgraded HDB Financial Services to buy from neutral with a target price of 790 rupees. Rising interest rates are a concern for management, which aims to hold net interest margin at around 8% over the medium term. HDB plans to pass on the RBI’s 25-basis-point October repo hike to floating-rate loan-against-property customers, with rate revisions in other segments to be calibrated. Nomura noted that 2Q net profit was below its estimate but the lending business was largely in line, and Nomura expects healthy disbursal momentum to continue. HDB’s shares closed 7.7% lower at 538.60 rupees.

Bank of Queensland remains in a tough position despite recent margin expansion, according to Macquarie analyst Jason Shao. He noted that BOQ’s better-than-expected second-half net interest margin was supported by a deliberate reduction in the size of its balance sheet. Shao warned that scale is needed to improve overall returns but expects margin pressures to re-emerge as BOQ starts growing its mortgage book again. He said he struggles to see how BOQ can improve return-on-tangible equity beyond 8%. Macquarie kept an underperform rating with a target price of 5.50 Australian dollars. BOQ shares fell 0.15% to A$6.86.

Macquarie also maintained an outperform rating on Netwealth despite the Australian investment manager’s disappointing September-quarter flows, raising its target price 0.7% to A$27.70. The bank’s analyst said Netwealth offers robust EPS growth, strong fundamentals and opportunity tailwinds at an attractive valuation, with its premium relative to the S&P/ASX 200 benchmark index 40% below its five-year average. Netwealth shares rose 6.7% to A$16.45 after dropping 8% on the update.

Jefferies analyst Simon Fitzgerald noted that Netwealth’s first-quarter net inflows of A$2.5 billion disappointed when measured against the past 10 quarters’ moving average of A$3.8 billion. Still, Fitzgerald expects Netwealth to print record net inflows for the next three quarters. In July, Netwealth said it would provide a domestic platform solution for Morgan Stanley’s Australian wealth-management business. Jefferies says this arrangement hasn’t contributed meaningfully yet. “We expect a solid ramp into the fiscal year-end,” Jefferies says. “This is further supported by the 9,423 new accounts, nearly 100 new financial intermediary agreements and record MA net inflows over the last six months.” Jefferies kept a buy call on Netwealth’s stock.

Barclays economist Brian Tan expects Bank Negara Malaysia’s November meeting to be a “close call,” with the central bank likely to raise its policy rate by 25 basis points, though the move could be delayed until January 2027. Malaysia’s economy grew 5.3% year-on-year in the third quarter, slowing from 6.0% in the second quarter. Manufacturing growth accelerated to 7.5% from 7.3%, while weaker mining activity weighed on overall growth. Barclays maintains its 2026 economic growth forecast for Malaysia at an expansion of 5.6%, above the government’s revised estimate of 4.8% to 5.3%.

SEB’s chief rates strategist Jussi Hiljanen said U.S. Treasury yields may have reached levels where their elevated readings weigh on risk sentiment. The sharp rise in short-dated Treasury yields coupled with a decline in long-dated ones after Wednesday’s September consumer-price inflation print suggests risk sentiment is fragile, helping cap the upside in Treasury yields. “The coming days will be important in determining whether the move triggers a continued short-covering rally,” he said.