HSBC downgrades Abrdn, cautious on near-term prospects for wealth managers

HSBC downgraded Abrdn on Friday to ‘reduce’ from ‘hold’ as it took a look at UK wealth managers.

The bank, which lifted its price target to Abrdn to 185p from 175p, said it does not see the company coming close to its 2020-23 targets in the near term.

"And we see its dividend growth constrained to 0% for the foreseeable future, as it struggles to generate enough cash from its ongoing businesses to cover corporate and dividend costs," HSBC said.

"It may have to rely on potential disposal proceeds to fully fund its dividends and potential share buybacks."

In the same note, HSBC reiterated its ‘buy rating on M&G as it said there was 30.9% implied upside to its new 265p target price, lifted from 260p.

"We see M&G offering very attractive resilient capital returns which are supported by the Heritage business that provides a resilient source of earnings and capital generation as it runs off over time," it said.

HSBC retained its ‘hold’ rating and 1,300p price target on St James’s Place. "We see SJP as a long-term winner in the UK wealth management and asset gathering space, but we are more cautious on its prospects for the near term," it said.

More broadly, HSBC said it was cautious on the near-term prospects for the asset/wealth managers, as it sees pressures on UK household incomes and savings, and general uncertainty for UK consumers.

"Increasing costs for: goods and services; mortgage payments; personal taxes; etc, all lead to less disposable income and savings for consumers to put into long-term savings and asset management (AM) products," it said. "In addition, the general uncertainty and increased cautiousness of consumers is likely to delay investment decisions and thus delay/reduce gross flows into asset/wealth managers, in our view."

At 1100 GMT, Abrdn shares were down 4.6% at 205.28p.