Shore Capital upgraded its stance on TP Icap on Tuesday to ‘buy’ from ‘hold’ following the company’s results last week.
It said the FY numbers were broadly in line with its estimates after significant downgrades through last year.
“The results portray a company which still faces large structural challenges,” the broker said. “However, the outlook was surprisingly cautious, in our view, given the backdrop of yield curve steepening, interest rate rises, market volatility and recent weakening in GBP versus USD.”
Shore said the stock’s valuation was not demanding coming into these results, however it has since lost further ground.
“The share price appears to be saying that the dividend is not sustainable. We think it is and leave dividend per share forecasts unchanged, implying a yield of 8.8% in FY22F rising to 10.1% in FY23F.”
Shore said that while TP Icap is not one of its favourite stocks among UK financials, the dividend yield is now sufficient for it to recommend the shares.
At 1315 GMT, the shares were up 6.7% at 127p.
