Deutsche Bank lowers target price on Direct Line

Deutsche Bank noted that Direct Line had warned on everything it was worried about and more - including its earnings outlook from now until the end of 2023, a flat ordinary interim dividend per share, the removal of the second £50.0m tranche of its buyback and a solvency ratio at 150%, its lowest since 2015.

"Altogether, with potential consensus downgrades in the order of circa 25% in 2022e and circa 15% in 2023-2024e, we think it is unsurprising that the shares are off 13% today, and we note that this is incremental to the -12% at the time of Sabre's (not covered) profit warning last Thursday," said DB.

Looking forward, the German bank believes that although Direct Line appears "incredibly lowly rated" at a 12.2% 2023 ordinary dividend yield against its historical average, it "could be a while" before it sees any real re-rating as the firm's COR guidance and capital outlook remains "constrained".

Reporting by Iain Gilbert at Sharecast.com