Jefferies downgrades AJ Bell on 'darkening' outlook, shares tumble

The bank, which cut its price target on AJ Bell to 220p from 240p, said its December upgrade to ‘hold’ was premature.

"We like AJ Bell's business model: a foot in both D2C and Advice camps, a resilient top line and strategic flexibility from relatively low charges. However, the darkening near-term outlook and a relatively high multiple lead us to cut our rating to ‘underperform’."

Jefferies said inflation will likely reduce discretionary spending. The bank’s consumer team expects "income available to UK discretionary expenditure to contract more than 6% in 2023/24...despite 5.5% earnings growth" and the new energy subsidies.

"Effects on savers and pensioners and how they prioritise their discretionary spending will differ," it said. "Before the credit crunch, it was normal for saving to increase when CPI was high, whereas the opposite has been true since.

"Our view is that retirees may spend more this year, using some savings, and savers will save less. We base this view on post-crunch saving behaviour, search behaviour, and the trend in non-essential spending."

At 1125 BST, the shares were down 10% at 250.89p.