Fund managers have identified a buying opportunity for Lloyds Banking Group shares, following Chancellor George Osborne's announcement the government will start selling off its 39% stake in the bank.
The Parliamentary Commission on Banking Standards' report on banks published earlier this week also emphasised the favourable position of Lloyds compared to RBS, which the government could split up into good and bad banks.
The news has boosted forecasts for Lloyds, and today the stock was among the biggest winners on the FTSE, gaining 1.5% or 0.94p to 62.17p. It is now nearing its recent high of 62.98p seen at the end of May.
However, RBS continued to slide in morning trading as investors reacted badly to the news the bank remains mired in problems and may be split. RBS shares were off 1.7% at 298.6p, one of the worst performers in today's trading.
Matthew Beesley, director for global equities at Henderson Global Investors, believes Lloyds' shares have significant upside potential, making it a good time to buy the stock.
"We bought Lloyds when it was 39p per share and we have a strong view it is worth 80p-85p. We think investors can make money by buying it today and riding the benefits of the restructuring without the fear of government interference," he said.
He also thinks Lloyds will benefit from the increased demand for mortgages resulting from the recently introduced Funding for Lending and Help to Buy schemes, as the bank has a competitive advantage in the mortgage market.
Guy de Blonay, manager of the Jupiter Financial Opportunities fund, is also positive on Lloyds and said its "job is already done" and "we are getting closer to having normal banks" in Britain.
He holds 2.5% in Lloyds in his fund and sees an opportunity to add more to the position, as the privatisation offsets concerns about any overhang remaining from the financial crisis.
However Ben Ritchie, senior investment manager on the UK and European equities teams at Aberdeen Asset Management, is not convinced about the health of the UK's banks.
He said: "The Parliamentary Commission on Banking Standards report is welcome but will not prompt a knee-jerk reassessment of bank holdings in our UK equity portfolio."
