Canaccord Genuity hits Close Brothers with double downgrade
Analysts at Canaccord Genuity slapped merchant banking group Close Brothers with a double downgrade from 'buy' to 'sell' and cut their target price on the stock from 1,483.0p to 992.0p, warning that macro risks had still not been "fully priced in".
Canaccord Genuity said on Wednesday that it believes consensus forecasts are likely to be subject to "material downgrades" to reflect "a more realistic outlook" for its banking division in a UK recession in 2023.
"Currently consensus forecasts a 4% decline in adjusted basic earnings per share in FY23, followed by 17% year-on-year growth in FY24. We believe this profile is unrealistic in a recessionary environment and expect meaningful consensus downgrades," said Canaccord.
In contrast, the Canadian bank forecasts an 18% decline in adjusted basic earnings per share in the 2023 trading year, followed by a 2% decline in 2024, before returning to 18% year-on-year growth in 2025.
Canaccord added that it believes the key sensitivities for the banking division were net interest margin and the bad debt ratio.
Reporting by Iain Gilbert at Sharecast.com