Deutsche Bank cuts Direct Line to ‘hold’

DB noted the shares now trade close to a valuation low at a 10.1% 2023 estimated dividend yield.

“"Despite the valuation, we don't think this is enough to remain positive on the shares," it said. "In our view, a re-rating is dependent on when the market believes top-line (and thus bottom-line) momentum will inflect, which we don't think will occur for up to six months."

Deutsche said this is based on its view that it could take the market over three months to begin to price in claims inflation, and longer than that for Direct Line to see a volume uplift.

"Reflecting this and the lack of an immediate catalyst, we no longer have conviction in our buy, and as such downgrade our recommendation to a hold," it said.