Jefferies cuts Prudential to 'hold'; highlights less certain growth outlook

Jefferies downgraded Prudential to ‘hold’ from ‘buy’ and cut the price target to 1,753p from 1,802p to accommodate for the company's less certain growth outlook.

Jefferies said the company’s growth profile will likely be under scrutiny over the coming quarters with recent management dislocation coinciding with downside risks to growth in the core territories. It pointed to the Chinese equity market correction, the Indonesian economy, US fiduciary requirements and solvency II in the UK.

It noted that the group is guiding to structurally lower volumes in the US going forward. “Regulatory risks are also surfacing in the US with the Department of Labor proposals for increased fiduciary requirements likely leading to lower volumes over the medium term and increased scrutiny of customer charges.”

It said that while Prudential continues to be well placed in the UK for bulk deals, margins might be constrained in the wake of Solvency II.

As far as management changes are concerned, it said the appointment of Mike Wells as chief executive officer was widely expected, but Barry Stowe’s appointment as US CEO was less so.

“Hopefully these changes will not prove coincident to a sequence of external challenges to growth compared with the successful trajectories of both the local and group business models under Tidjane Thiam’s management,” it said.

At 09:49, Pru shares were down 1% at 1,618p.