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Much has changed since Lloyds Banking Group joined the Government's Asset Protection Scheme (APS) and the shares have the scope to more than double in value from their current level of 47.5p, up 0.3p.
That is the view of UBS, which has repeated its buy rating on Lloyds and says that membership of the APS means it is no longer a conventional bank. It is significantly less risky than many of its European peers and this has yet to be digested by the market.
Membership of the APS came at a price with 10.4 billion extra shares issued at 38.43p, which may anchor the price close to current levels for a while.
"We see this level as a very attractive entry point," said UBS analyst John-Paul Crutchley, repeating a 100p target price. "Our preferred way of valuing Lloyds is discounting 2012 normalised earnings of 16p valued at nine times, less 10p a share for the net post-tax cost of the APS, giving 110p a share."
Lloyds can be divided into a good bank remaining profitable throughout the downturn and a bad bank nursing a gross maximum loss of £25 billion.
"The APS will initially be a drag on Lloyds earnings but we expect a positive contribution once the first loss is utilised," UBS said. "We estimate the net present value, after-tax, cost of Lloyds' involvement in the APS at £4 billion, or 10p a share."
There was a sigh of relief among stock market bears as the recent squeeze showed signs of easing. The FTSE 100 index fell 41.13 to 3822.86, having risen about 9% during the past six trading sessions.
Compass Group, the world's biggest independent catering contractor, dropped 15p to 301¾p after Deutsche Bank dropped its rating from hold to sell. Only yesterday, the group bought back 75,000 of its own shares at 315½p.
UBS has been taking a closer look at the miners. It has raised Xstrata, up 1p at 391¼p, from neutral to buy and jacked up the price target for Kazakhmys, off 3p at 318p, from 200p to 330p while continuing to rate the shares at neutral.
It has a neutral rating on Anglo American, down 14p at 1139p, with the target cut from 1395p to 1250p. Rio Tinto, 33p lower at 2068p, is viewed as a buy, with its sights raised from 2200p to 2600p. Aquarius Platinum, 4¾p cheaper at 157¼p, is seen as neutral, with the target raised from 125p to 165p.
A late sell-off in New York drained some of the enthusiasm that investors had been showing for shares in recent weeks and left the Dow Jones nursing a small loss of 7.01 at 7216.97 by the close of business.
American Express highlighted just how fragile sentiment remained. It warned that the number of customers defaulting on their card payments had continued to grow throughout February.
Its shares finished the day 3% lower at $12.66 and succeeded in taking the edge off the rest of the sector. Earlier in the session, Citigroup climbed back above the $2 level, helped by the gradual return of confidence in the banking sector. Bank of America was another winner, adding 7% at $6.18, but JPMorgan lost ground, falling almost 3% to $23.09.
Investors in the Far East continued to chase share prices higher this morning. In Tokyo, blue-chips rose more than 3% as banks climbed on improved sentiment about the international financial system and hopes for new policy steps by the Bank of Japan and Federal Reserve.
Mitsubishi UFJ Financial Group surged 7.3% and Sumitomo Mitsui Financial Group rose 8%. The Nikkei 225 closed up 251.54 points at 758.23.
Hong Kong shares also made headway as HSBC piled on gains ahead of a shareholder vote on its rights issue, but some China stocks beat a retreat after yesterday's strong rally.
The Hang Seng index ended the day 98.62 points lower at 12,878.09, breaking a five-day rally.
