Rathbones Shares Remain ‘Highly Undervalued’

Rathbones Group (LON: RAT) was initiated with a Buy rating by Bank of America, which sees significant upside potential for the UK wealth and asset manager. 

The bank set a price target of 2,250p per share on the stock. This implied around 35% upside from Tuesday’s close.

In a note to investors, BofA analysts stated that they consider the stock “highly undervalued” at roughly 10 times its forecast 2026 price-to-earnings ratio, noting that this represents a 19% discount to Rathbones' five-year average valuation.

Central to BofA’s bullish view is Rathbones’ acquisition of Investec Wealth & Investment (IW&I), which the firm describes as “transformational.” 

The deal is said to have boosted funds under management and administration (FUMA) by 67% and established one of the largest UK wealth managers.

The integration of IW&I is expected to be completed in the first half of 2025, with a recovery in net flows and the realisation of most synergies projected by the second half of that year. 

“This should drive operating margin expansion to 28.4% in 2026E,” BofA said, ahead of consensus forecasts of 27.7%.

The bank also expects net flows in both wealth and asset management to benefit from a more favourable macro backdrop, including “equity market momentum, softening interest rates and reallocation from US to EU equities.”

The bank's analysis suggests Rathbones is well-positioned to deliver both operational and share price gains as integration progresses and market conditions improve.

Rathbones' shares have made gains in recent weeks. However, over the last few years, upside momentum has been significantly limited. Over the last 12 months, the stock has increased by approximately 1.9%.