Close Brothers shares (LON:CBG) have fallen back below 500p today, down 3.8% as a downgrade from RBC Capital Markets hits sentiment. The analyst firm moved from “Outperform” to “Sector Perform,” despite maintaining a price target of 525p. The revision follows a substantial 120% surge in the company’s share value since the start of the year, prompting valuation concerns.
The markets reacted to the adjustment, reflecting a period of recalibration after the stock’s significant gains. While the price target remains neutral, the downgrade suggests a tempered outlook on further appreciation in the near term.
RBC Capital’s decision is rooted in the stock’s current trading level of 0.56 times the one-year forward tangible book value, a figure considerably lower than its historical average of 1.56 times. This suggests that the market may have already priced in much of the company’s potential upside.
WELCOME BONUS - Free Share Bundle When You Invest £50!
Open a UK Investment Account: Shares, ISAs, Managed Portfolio
Invest in 15,000+ shares and ETFs. Open an account now, invest at least £50, and you’ll get a free share bundle worth between £40 and £200. T&Cs apply.
IG
View Offers
Empfohlener Broker
Multi Asset Platform
Furthermore, the recent UK Supreme Court ruling concerning motor finance commissions is a salient factor for the sector. Close Brothers has proactively allocated £165 million in provisions to address potential liabilities stemming from the ruling, aligning closely with RBC’s projected impact of £170 million.
Looking ahead, RBC forecasts an adjusted return on tangible equity of 6% for fiscal year 2025, which is expected to decrease to 5.6% in 2026 before rebounding to 7.3% in 2027. Dividend payments are projected to resume in 2027 at 30p per share, translating to a 5.8% yield.
In related news, Close Brothers Group finalized the sale of Winterflood Securities to Marex Group plc for approximately £100 million in July. This divestiture aligns with the company’s strategic objective to streamline operations and concentrate on its core business segments.
Searching for the Perfect Broker?
Discover our top-recommended brokers for trading or investing in financial markets. Dive in and test their capabilities with complimentary demo accounts today!
- IG Top-tier regulation – Read our Review
- eToro Wide range of instruments available to trade – Read our Review
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
