RBC Capital ups Aldermore to 'outperform' after Q3 results

RBC Capital Markets upped its stance on Aldermore to ‘outperform’ from ‘sector perform’ and lifted the price target to 210p from 190p after the challenger bank’s third-quarter update.

The bank pointed to strong growth in the quarter and reassuring guidance from the group for the full year 2016, with no changes in customer demand, a strong pipeline and a robust credit performance.

“We believe its positive outlook, combined with a diversified loan book, materially conservative forward consensus and double digit upside (11%) in a fully valued market, now warrants an outperform rating.”

Incorporating the company’s Q3 results into its forecasts leads to upgrades to its earnings per share estimate, which rise 9%, 5% and 2% for 2016, 2017 and 2018, respectively.

RBC said Aldermore’s diversified loan book – 40% buy-to-let mortgages, 22% residential mortgages, 24% business finance loans and 14% SME loans – offers additional protection against downside risk.

The Canadian bank said consensus upgrades were likely following Thursday’s results.

At 0947 GMT, Aldermore shares were up 5.2% to 199.27p.