Abrdn PLC (LSE:ABDN) is in a bind that share buybacks won’t get it out of, Credit Suisse suggested today.
The wealth platform and fund manager has committed to return a significant proportion of proceeds from future stake sales through share buybacks.
“Using stake sales to fund buybacks does not increase the fair value of the shares, in our view, but will help the achievement of per share elements of management remuneration target KPIs,” the Swiss bank said in a note.
Keeping with an ‘underperform’ rating, the Swiss bank did raise its share price target to 210p from 160p currently but added this reflects cost savings, lower shares in issue and tax rate assumptions.
Credit Suisse also doubts the growth levels reported by recent acquisition interactive investor can be maintained.
Knocking out treasury income, revenue at ii fell 12% last year estimates the bank, with a further 8% dip likely in 2023 with retail trading activity set to be subdued in the near term.
Pluses are a possible refund of an £800mln pension surplus and recovery in investment performance but on seventeen times 2024 earnings abrdn shares are expensive, adds the bank.
There is a 6% dividend yield, but this is only just covered by capital generation in 2024 and adjusted earnings in 2025 following the buybacks.
Shares eased 1.3 to 229.5p.