Analysts at Deutsche Bank slightly lowered their target price on investment manager M&G from 230.0p to 225.0p on Friday, stating it was “waiting for the kettle to boil”.
Deutsche Bank stated market movements during 2021 were likely to have contributed 14 points to M&G’s solvency ratio and could add an additional £530.0m of net cash remittances in 2022.
Unsurprisingly, DB noted that hopes were increasing that management will announce a plan to deploy the build-up in excess cash, including a capital return to shareholders, at its full-year results.
“In this respect, we note that the 8% rise in the shares year-to-date implicitly captures circa £400.0m of capital return already, and we ourselves now build in a share buy-back of that amount – though at interim 2022,” said the German bank.
“However, whilst this could indeed be positive, we remain concerned about the growth of the underlying fund management business and the group’s high leverage.”
Deutsche Bank retained its ‘hold’ recommendation on the stock, noting it sees “better value elsewhere in the sector”, particularly at Aviva.
