Shore Capital has upgraded Close Brothers Group PLC (LSE:CBG), the specialist lender and asset manager, to buy from hold, arguing that the shares now offer an attractive balance of risk and reward.
The broker lifted its price target to 495p from 490p, implying upside of around 21% from the current level of 408p.
Analyst Gary Greenwood said the stock had drifted back towards 400p in recent weeks, underperforming the wider sector despite no meaningful deterioration in the underlying investment case.
Close Brothers shares have fallen 7.9% over the past month, lagging the FTSE All Share by 9%.
Motor finance uncertainty remains the central overhang on sentiment.
The Court of Appeal has confirmed that omnibus claims, which allow similar complaints to be bundled together, can be brought in relation to motor finance grievances.
The Financial Conduct Authority has also partially suspended its proposed redress scheme, with legal hearings now scheduled for December 2026 and February 2027.
Greenwood argued that these developments, while extending the uncertainty, offer no meaningful new information on the eventual scale of industry compensation costs.
In his view, the market is no closer to pinning down a definitive liability figure than it was several months ago.
The lender has made no further change to its £320 million provision since raising it by £30 million in May.
Shore Capital calculates that Close Brothers retains around £374 million of core capital headroom above its minimum regulatory requirement, providing substantial capacity to absorb any additional provisions.
The shares trade on just 0.5 times forecast tangible net asset value for the current financial year.
Management is targeting a double-digit return on tangible equity by the 2028 financial year.
Greenwood said his own forecasts sat slightly below that goal, leaving scope for further upside should management deliver.
A sustainable 10% return on tangible equity would justify a valuation of around 655p, he added.
