Investec downgrades Rathbones on valuation grounds

Investec downgraded wealth manager Rathbones to ‘hold’ from ‘buy’ on Tuesday after the shares outperformed the sector by over 30% in the past 12 months, making the risk/reward dynamic less attractive.

Investec, which cut its price target on the stock to 2,195p from 2,285p, said that despite this valuation call, it continues to acknowledge the group’s position within an industry which should enjoy medium-term structural growth and cannot rule out the potential of it being a consolidation target.

Still, Investec said this was unlikely until the company’s current IT programme and acquisition integration is closer to completion.

At the FY22 results on 1 March, Investec expects Rathbone to announce underlying pre-tax profit of £97.3m, marginally ahead of the FactSet median of £95.8m, albeit down 19% year-over-year.

It also expects the group to declare a full-year dividend of 83p a share, up 3%, consistent with its progressive dividend policy.