Berenberg starts Funding Circle at 'buy', shares surge

Funding Circle surged on Monday after Berenberg initiated coverage of the stock at ‘buy’ as it took a look at specialist lenders.

The bank, which set a price target of 120p on Funding Circle, noted that the company has developed a highly automated lending platform with about £4.5bn of loans under management.

"The first few years as a public company have not been easy for Funding Circle - its valuation has fallen by circa 80% since its IPO in 2018. However, we view this pessimism as somewhat misplaced. The company has already addressed a number of the issues with its business model and, from the start of this year, has had a new CEO at the helm."

Berenberg said there are growth opportunities for Funding Circle both in its existing market and with the launch of new products.

In the same note, the bank started coverage of Secure Trust Bank at ‘buy’ with a 1,820p price target and S&U at ‘hold’ with a 2,660p target.

As far as Secure Trust Bank is concerned, Berenberg said that under a new CEO, appointed in 2021, it has strong growth prospects and is currently undervalued

Meanwhile, it said S&U has a long track record of growth and profitability. "The business has also been tested through the credit cycle, having operated through both the global financial crisis and the Covid-19 pandemic," it added.

At 1130 GMT, Funding Circle shares were up 18% at 72.90p, Secure Trust was 4.9% higher at 1,290p and S&U was up 1.7% at 2,440p.