Citigroup downgrades Schroders as it forecasts drop in 2016 EPS

The bank continues to like Schroders’ diversified assets under management mix, growth potential and ability to cope with regulatory hurdles.

However, on a 12-month view, challenging markets and the company’s “commendable commitment” to investing in its future mean Citi forecasts a 5% drop in earnings per share this year.

“We downgrade SDR today to reflect our more conservative expectations for earnings and our view that the current valuation adequately reflects this.”

The bank pointed out that the rating change was not related to the announcement on Thursday that chief executive Michael Dobson would step down from his role but stay on as chairman.

He will be replaced by Peter Harrison, who is head of investment.

“Whilst Dobson’s departure is the end of an era, we see Peter Harrison as experienced and well qualified,” said Citi.

“If there is a definition of an orderly CEO handover then this is it, in our view.”

However, news of the handover did not go down as well in the City, with business lobby groups accusing Schroders of violating the UK code of governance, which recommends firms only switch a chief executive to the supposedly independent role of chairman in exceptional circumstances.

According to the code, a company should also explain to its shareholders why it has done so.

At 1005 GMT, Schroders shares were down 3.5% to 2,643p.