RBC initiates coverage on IG Group at 'outperform'
RBC Capital Markets initiated coverage on UK-based trading outfit IG Group at 'outperform' on Tuesday despite noting that the firm's "robust growth trajectory" had been interrupted by the implementation of new EU regulatory measures.
Financial Services
13,969.36
17:09 25/04/24
FTSE 250
19,601.98
17:09 25/04/24
FTSE 350
4,434.34
17:09 25/04/24
FTSE All-Share
4,387.94
16:49 25/04/24
IG Group Holdings
732.50p
16:35 25/04/24
While the Canadian investment bank thought most adverse regulatory scenarios were now "more than reflected in the share price", it did caution that regulatory changes in Australia did appear to be on the horizon.
RBC said IG, for whose shares it issued a 720p target price, was now well-positioned to weather the storm as the disorder and uncertainty surrounding the implementation of new UK/EU regulations had now begun to resolve.
"We would argue that the advantages afforded by IG Group’s leading competitive position within the CFD arena, as well as its ability to innovate and diversify (partially related to its ability to invest, and repurpose group resources), will become increasingly evident," said RBC's analysts.
However, RBC did note that it expects permanent client departures to continue, as well as lower levels of trading from other customers as the activity levels of the latter become more sensitive to market conditions.
The bank expects to see combined net profits from two of IG's new initiatives, the recently established regulated entity in the US which will focus on retail FX trading and its Spectrum offering in Continental Europe, an exchange-traded leveraged product which it expects to launch in May, to contribute roughly £9m per year in net profits by fiscal year 2022.
"Whilst IG’s previously robust growth trajectory has been interrupted by the implementation of EU regulatory measures. In our view, and based on our analysis, probable adverse regulatory scenarios are now more than reflected in the share price."