LONDON (ShareCast) - (Sharecast News) - Citi downgraded its stance on AJ Bell to 'sell' on Tuesday and cut its price target to 390p from 450p, citing risks from cash balances and competitor pricing.
"AJ Bell has taken significant market share in recent years, with assets under administration growth driving consensus upgrades," it said. "However, we expect price cuts for its largest D2C competitor, which may slow growth."

Citi said its analysis suggests that AJ Bell is over-earning on client cash balances, which account for around 13% of D2C AUA.

"We expect this to fall, with a 2ppt reduction a 15% earnings per share headwind," the bank said. "Our EPS estimates are 10-20% below consensus and we cut our 2027 EPS estimate by 5%."

More broadly, Citi said that in 2025, falling interest rates and increasing capital markets activity should be supportive for the diversified financials sector.

"The alternative managers and exchanges are our preferred subsectors; we note an extreme valuation gap for the former versus US peers, which we believe should narrow," it said.

It said the diversified financials sector provides a "rich opportunity for bottom-up stock picking, with wide intra-sector stock dispersion".

Citi opened an "upside catalyst watch" on 3i Group, which it rates at 'buy'. The bank said its three most-preferred stocks are 3i Group, Allfunds and ICG.

Its least-preferred stocks are AJ Bell, Ashmore and Vontobel.

At 0815 GMT, AJ Bell shares were down 2.3% at 441.72p, while 3i Group was 1% higher at 3,657p.

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