Legal & General Group PLC (LSE:LGEN) could pull off a buyback to boost its share price, but whether the option is a good idea is another question, according to UBS analysts.
“Compelling reinvestment opportunities” make a buyback by L&G “economically unattractive,” UBS said in a note, though the move could “break the deadlock on the shares”.
L&G’s share price has fallen 6.9% over the past year, with UBS offering a target of 240p, just 0.8% higher than Wednesday’s close, alongside a ‘neutral’ rating for the insurer.
UBS suggested a buyback, alongside L&G’s announcement of a new chief executive, could be enough to prompt positive share price movement.
“L&G can still execute a small share buyback without detriment” to reinvestment opportunities,” UBS added, suggesting a figure around £400mln.
A bond purchase agreement in the region of £10bn would be more attractive though, UBS continued, likely leading to better “value creation” and returns.
“Compelling returns are still available from reinvesting into L&G relative to returning capital to shareholders," the bank reiterated, suggesting the insurer has several options moving forward.