Deutsche Bank cuts M&G to 'hold', cites weak underlying trends

Deutsche Bank downgraded its stance on shares of asset manager M&G to ‘hold’ from ‘buy’ on Thursday, cutting the price target to 195p from 210p as it argued that while first-half results were a positive surprise, underlying trends appear weak.

"Recent results were marked by better-than-expected costs and exceptionals, with management also reiterating the group's 2020-2022 capital generation target,” DB said. "As we dig deeper, however, the picture looks less engaging. Costs were lower than expected in the 1H, but ultimately we think revenue pressures will prove the stronger force.

"Likewise, we now believe that the capital generation target can only be achieved through another reinsurance deal, which may merely accelerate value rather than adding to it, and could at that stage prompt a re-basing of the dividend."

DB said that while it recognises the attractive dividend yield, with no catalysts to justify a re-rating, it has decided to downgrade.