Deutsche Bank ups Aldermore target price, sees further upside

Deutsche Bank upped its price target on challenger bank Aldermore to 257p from 194p as it reiterated its ‘buy’ rating on the stock.

It noted the shares are up 38% since the beginning of September amid an improved perception of the UK economy and following a better-than-expected third quarter.

“We think there is still upside from here, driven in particular by falling funding costs,” Deutsche said.

“On today’s advertised deposit rates, we estimate a flow cost of deposits of around 1%, compared with 1.8% at 1H16. We expect the majority of this benefit to flow through over the next two years, helping offset asset pricing pressure and providing Aldermore with a stronger buffer against falling margins than other UK peers.”

The bank said key downside risks include deterioration in the UK economy or market sentiment, slower loan growth, asset price compression, higher loan losses/UK recession, a material fall in house prices and higher capital requirements.

At 0915 GMT, the shares were up 3.7% to 236.70p.