Broker tips: Close Brothers, M&G
By Iain Gilbert
Date: Wednesday 08 Apr 2026
(Sharecast News) - Shore Capital downgraded Close Brothers on Wednesday to 'hold' from 'buy' on Wednesday as it recommended that investors take profits after the merchant bank said the motor finance redress scheme would cost it around £320m, but that this could be "comfortably absorbed".
Shore had upgraded the shares to 'buy' following a report from short-seller Viceroy Research a couple of weeks ago, which suggested that Close Brothers would need a materially higher provision that could potentially threaten solvency. The report led to a sharp selloff in the shares.
"At the time, we considered these claims to be excessive, a view supported by management commentary," the broker said. "Today's announcement suggests that our initial assessment was broadly correct. That said, we note that some uncertainty remains around the ultimate provision, given the potential for legal challenges to the scheme and claims pursued outside the FCA framework by law firms and claims management companies.
"With the shares up 33% since we upgraded our recommendation and having largely closed the gap to our target price (475p), we believe it is now appropriate to take some profits, particularly given that underlying operational performance remains weak and significant execution will be required for the group to deliver on management's FY28F double-digit return on tangible equity target, which we view as stretching."
Shore said it would reconsider its stance on Close Brothers if the shares were to fall back below 400p in the absence of negative new information and/or the group demonstrates a meaningful improvement in underlying operational performance relative to its expectations.
Analysts at RBC Capital Markets nudged up their target price on global investment manager M&G from 260p to 285p on Wednesday following the group's full-year results.
RBC Capital updated its forecasts on the back of M&G's FY25 results, with its adjusted operating profit forecasts increasing by 4% on average over FY26-28 as earnings benefitted from upgrades to the firm's Life business,
The Canadian bank, which has a 'sector perform' rating on the stock, also enhanced its open business net flows assumptions after a strong FY25, and lifted the group's Solvency II ratio by five points to 238% - well above the firm's target operating range of 160-190%.
RBC pointed out that M&G initiated "a progressive dividend policy" at the time of its FY24 results in March 2025 and said it now expects to see a dividend per share growth rate of 2% per annum, down from 3% previously, as the FTSE 100-listed company focuses on Life new business investment, and leverage remains above target to FY28.
It also noted that its new target price reflected higher earnings and the one-year roll forward in its valuation model, partially offset by an increase in the risk-free rate in the UK year-to-date.
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