Numis cuts ICAP to 'sell'; says shares don't reflect challenging market conditions
Numis downgraded ICAP to ‘sell’ from ‘hold’, saying the shares have run too far.
Financial Services
14,075.11
17:09 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
ICAP
469.70p
17:09 14/12/16
It pointed out that the shares are up 36% over the last six months versus the FTSE all Share up 6% and said they are now overvalued relative to both peers and their historical average.
Numis said ICAP warrants a premium valuation due to its market-leading position, strong electronic platforms and well-established track record of developing new products and services. However, the current valuation does not reflect the ongoing challenging market conditions, the higher level of targeted investment spend or the investigation into the possible manipulation of ISDAfix prices in the US.
Numis said that while many of the headwinds that have impacted interdealer brokers in recent years are abating, they have not disappeared entirely.
“Investment banks have already been forced to significantly reduce proprietary trading activities, interest rates are near zero (some economies are considering rises), and volatility has been increasing. Nevertheless, these factors have not disappeared entirely and in our view, are still likely to remain a drag on the group's near-term performance,” remarked Numis.
Numis has a 440p price target on ICAP.
At 1010 BST, ICAP shares were down 2.3% at 553p.