Old Mutual under pressure on RBC downgrade, rand slump

Shares in Old Mutual, which generates a large chunk of its profits from South Africa, slumped on Thursday as a broker downgrade and weaker rand weighed on the stock.

The rand fell near it lowest level against the dollar since 1971 after South Africa's president unexpectedly sacked finance minister Nhlanhla Nene.

RBC Capital Markets downgraded its stance on the stock to ‘underperform’ from ‘sector perform’ and cut the price target to 180p from 200p.

It said dual-listed Old Mutual is a complex group with significant currency exposure and the bank has concerns around investors’ attitude to the Solvency II coverage ratio, which it expects will be towards the lower end of the peer group.

“In Africa, Old Mutual has significant growth opportunities, but the foreign-exchange headwind of such significant exposure to the rand will hold back the share price,” said RBC.

At 0937 GMT, shares in Old Mutual were down 5.9% to 183.90p.