RBC Capital downgrades Schroders, says shares near fair value

RBC Capital Markets downgraded Schroders to 'sector perform' from 'outperform' and cut the price target to 3,300p from 3,400p, as it said the share price was near fair value.

RBC said that while Schroders continues to offer diversification, a best-in-class balance sheet and an accomplished management team, upside potential is more limited after a period of outperformance.

Schroders’ share price outperformed the sector in the third and fourth quarters of last year, up 14% and 11% respectively, against the sector up 9% and 1%, respectively.

"Our downgrade to sector perform has nothing to do with Schroders’ outlook, business model or management team, but instead we believe that after a period of outperformance the upside potential, while still positive, is more limited and no longer warrants a more positive thesis."

The Canadian bank said its valuation methodology is unchanged and it continues to value Schroders at a one-turn premium to the longer-term sector average multiples.

"We believe this is justified by Schroders’ diversification and the strength of the company’s balance sheet."

At 0930 GMT, the shares were down1.8% to 3,074p.