RBC Capital downgrades Direct Line, says risk/reward more balanced

RBC Capital Markets downgraded Direct Line on Friday to ‘sector perform’ from ‘outperform’ and slashed the price target to 190p from 260p, as it said the risk/reward of the shares is now more balanced.

"We think DLG can restore its solvency towards the 160% level organically in 2023, predicated on a dividend rebasing that we think is the most economically sensible option," RBC said.

"While this challenges DLG's dividend appeal, it averts the need of a capital raise, at a time when access to market funding is costly, if not undesirable to shareholders."

RBC said the new CEO appointment could catalyse a recovery, albeit it might not be immediate and timelines are not clear.

At 0930 GMT, the shares were down 1.4% at 182.49p.