Maiden dividend at Aldermore now seems assured in 2017, Investec says
Aldermore Group
n/a
n/a
Investec's Ian Gordon lifted his target price on challenger bank Aldermore's shares slightly higher, describing the lender's first half performance as "superb".
Banks
4,171.41
16:05 01/05/24
FTSE 250
19,905.82
16:05 01/05/24
FTSE 350
4,462.50
16:05 01/05/24
FTSE All-Share
4,416.78
16:05 01/05/24
Loan growth volumes up by 19% on the year were ahead of forecasts, net interest margins were broadly stable at 3.5% and impairments were minimal, he explained in a research note sent to clients.
No less possitive, Aldermore managed to strengthen its tier one capital buffers more rapidly than expected, meaning that a maiden 2017 dividend "now seems assured".
"A key part of the Aldermore story is its relentless low-risk loan growth. We think that its tiny market shares of niche/underserved markets offers sustainable growth, even as the business matures (and redemptions normalise)," the analyst said.
"[...] We think it is time for Aldermore to receive due recognition for its conservative approach to risk. It has zero exposure to consumer credit, low-risk mortgages now constitute 77% of customer loans and, as per Figs 5/6, page 4, it continues to move down the risk curve. Little wonder its impairments are negligible."
Gordon also pointed out that the lender was carrying surplus liquidity with its funding costs set to fall even more through "mix" and ongoing back book repricing.
On the back of all of the above, Gordon nudged his target price higher, from 295p to 300p while reiterating his recommendation to 'buy'.