After a share price rise of more than 60% for the owner of Bank of Scotland in the year-to-date, that still leaves Cannacord expecting a 10% fall in the value of Lloyds's stock.
Analyst Gareth Hunt wrote in a note for clients: "While our topline income estimates have not moved materially, we have lowered both our operating cost and impairment charge numbers, base effects and resultant operational gearing feed through the model to drive a 40% [earnings per share] upgrade to our [full year 2014] estimate. We acknowledge that these are 'catch up' changes."
He noted recent sales, such as the £660 million disposal of Scottish Widows Investment Partnership to Aberdeen Asset Management, had alleviated worries about the capital position of the part-nationalised lender while problems on its loan book, particularly in the troubled Irish market, also look well covered by existing provision.
This leaves investors judging the direction of revenues and costs with Mr Hunt tipping Lloyds to receive growing profits from its mortgage book once interest rates rise.
The Government started selling down its stake in Lloyds in September.
Cannacord now ascribes a fair value of 73p per share to Lloyds and moved its target price from 35p to 70p. It retains a "hold" stance.
Michael Hewson, CMC market analyst, said: "Lloyds Banking Group has been the standout performer this year boosted by a return to profitability and government plans to significantly pare down its stake in the bank."