Deutsche Bank downgrades Aldermore on buy-to-let headwind

Deutsche Bank downgraded Aldermore Group to ‘hold’ from ‘buy’ and cut the price target to 267p from 330p pointing to another headwind for the buy-to-let market following Wednesday’s Autumn Statement.

Aldermore Group

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Banks

4,677.17

15:45 15/11/24

1.24%

57.25

FTSE 250

20,508.75

15:45 15/11/24

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FTSE 350

4,453.56

15:45 15/11/24

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FTSE All-Share

4,411.85

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It noted that the UK government has announced an increase in the stamp duty by 3% for BTL mortgages from April 2016.

“Given this latest change, and that we cannot rule out further amendments in the future if regulatory/policy aims on BTL are not achieved, we have lowered our loan growth assumptions for Aldermore, impacting EPS forecasts,” said DB.

It said the text in the Autumn Statement suggests the stamp duty change could be exempt for corporate or owners of more than 15 properties.

However, DB reckons the combined effect of these two measures and potential further regulatory change could see growth in the BTL market slowing.

It said that Aldermore is a small player in the market and could take share from other players, but a lower growth market could see greater price competition between peers, and/or a move for Aldermore to increase its share of owner-occupier mortgages, which are lower margin and lower return on equity due to Aldemore’s 35% standardised risk weight.

“We doubt that we will get clarity on the full impact of these changes on the BTL market until after April 2016 (when the stamp duty change is introduced),” it added.

At 1242 GMT, Aldermore shares were down 4.5% at 234.01p.