Berenberg lowers target price on LendInvest

Analysts at Berenberg lowered their target price on mortgage lender LendInvest from 275.0p to 230.0p on Tuesday, stating the group's outlook was "cloudy" despite a "strong" end to its 2022 trading year.

Berenberg noted that LendInvest's first full-year results since its listing in July 2021 were 7% ahead of expectations at the underlying earnings level at £20.3m, supporting its investment case and the analysts' 'buy' recommendation.

The German bank stated LendInvest's assets under management growth had been helped by "a buoyant property market" where prices rose by roughly 11% year-on-year to June, according to Nationwide.

However, Berenberg also noted that the outlook for continued house price growth was clouded by "necessary interest rate rises", given high levels of inflation in the UK.

"Higher interest rates lead to higher swap rates, with both two- and three-year SONIA rates increasing circa 2%+ versus July 2021. Taking both higher costs and lower margins into account, we have cut our estimates for both FY23E and FY24E by circa 20%," said Berenberg.

"Over the longer term, we continue to believe that LendInvest can grow strongly and we still forecast circa 40% EPS growth for FY23E. Considering that LendInvest operates in a large market, we believe that the company is well suited to deliver outsized returns for investors."

Reporting by Iain Gilbert at Sharecast.com