Analyst reaction: Lloyds Banking Group posts £3.5bn loss Ian Gordon at Investec kept his "hold" rating, saying: Despite a statutory reported loss of £3.5bn, "Combined Businesses" PBT of £2.7bn represents, we believe, only a small miss vs underlying market expectations. After stripping out accounting noise (including an unexpected and temporary £0.7bn boost to NII), cost performance was usefully £0.2bn better than consensus - almost fully offsetting modest underlying income/impairment disappointment (vs consensus). Unlike RBS, we believe Lloyds will return to (modest) profit in 2012E, and today's numbers, whilst grim and a small underlying "miss" in our view, underpin that expectation. However, we believe consensus remains too optimistic for 2012/13E. Gary Greenwood at Shore Capital also retained his "hold" stance on Lloyds. The outlook statement is cautious, reflecting the challenging external environment. As a result, the company has reiterated its view that strategic income and return on equity targets will be delayed beyond 2014. However, there is good news on costs, as the company has increased its 2014 savings target by £200m to £1.7bn (previously £1.5bn). Overall, our initial impression is that these results are broadly as expected. The shares are trading on a December P/TNAV multiple of 0.6x. This appears reasonable to us given that return on equity is likely to remain below cost of equity for another few years, while macroeconomic risks still lurk in the background. We retain a HOLD stance. Robert Law at Nomura hung onto his "reduce" recommendation. He commented: Given the complexities at Lloyds, our initial post-results reaction is subject to even more uncertainties than usual. Nevertheless, the main features seem similar to those at RBS. The group has strengthened the balance sheet at the expense of profitability and is deferring the achievement of its profitability targets. The group is likely to be in an extended phase of deleveraging, which implies weak revenues and capital build, which looks fundamentally unattractive. However, valuations remain low, at 0.6x TBV and 6.1x core business earnings, even though we think it will be many years before these earnings are achieved.