Lloyds remains a preferred pick within the sector for Jefferies, albeit with tempered expectations. Analysts note that, while Lloyds' stock is undervalued relative to historical averages and competitors such as NatWest Group PLC (LSE:NWG), these valuations reflect the risk that Lloyds could incur higher regulatory penalties. The report acknowledges the bank's hedging strategy, which could bolster income post-2025 and provide some insulation against base rate cuts. Nevertheless, Jefferies has reduced its buyback expectations for Lloyds over the next two years by £1.25 billion to account for increased motor provisions. Overall, Jefferies holds a cautious outlook for UK banks, expressing concerns over sector-wide implications from the Court of Appeal's stance on motor finance, which could lead to increased regulatory oversight across the industry.