RBC Capital downgrades Standard Life to ''underperform'

RBC Capital Markets downgraded Standard Life to ‘underperform’ from ‘sector perform’ and cut the price target to 430p from 480p.

“A comparison with asset managers indicates to us that Standard Life is relatively expensive and not worthy of its current 16.3x price-to-earnings multiple. We see its main product pensions coming under considerable pressure in the 8 July UK Budget,” said the brokerage.

RBC expects Standard Life to underperform its peers, noting that it’s more cautious on pensions.

“We expect changes to pensions tax relief for higher earners in the UK which will negatively impact a company with a high-end brand like Standard Life,” remarked the brokerage.

RBC said it expects the removal of higher rate pensions tax relief to be announced in the 8 July Budget. Tax payers who pay higher rate tax in employment and in retirement will have little incentive to save into a pension due to double taxation, it said.

RBC said Standard Life is now heavily reliant on the sales of its outperforming Global Absolute Return strategy product. “If the product runs into difficulties, such as poor performance or capacity constraints, this could dampen Standard Life's growth prospects, potentially causing the stock to underperform.”

At 0950 BST, shares were down 1.8% at 450.10p.