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Goldman Sachs cuts rating for St James’s Place to 'neutral', highlights regulatory risks

The US bank also cut its target price for the FTSE 100-listed firm to 1,200p, reduced from 1,275p previously, offering only around 5% upside to the current share price
Money chart
Goldman's analysts said: “Although we do not expect SJP to change its customer charges or operating model, we expect it would be adversely affected if regulation were to shift materially”

Goldman Sachs put the boot into St James’s Place PLC (LON:STJ) today, downgrading its rating for the blue chip wealth manager to ‘neutral’ from ‘buy’ in a sector review highlighting regulatory risks.

The US bank also cut its target price for the FTSE 100-listed firm to 1,200p, reduced from 1,275p previously, offering only around 5% upside to the current share price of 1,138p, which was down 1% or 12p on last night’s close.

READ: Citigroup bullish on Standard Life Aberdeen following merger completion

In a note to clients, Goldman’s analysts said: “SJP offers a fully integrated customer proposition, as permitted by current regulation. However, given the direction of regulation highlighted in this report, we prefer businesses with more transparent pricing structures.”

They added: “Although we do not expect SJP to change its customer charges or operating model, we expect it would be adversely affected if regulation were to shift materially”

The analysts concluded: “Regulation which either requires SJP to fully unbundle its pricing, or to revoke its use of surrender penalties on customers with pensions investment bonds, would likely put pressure on its revenue margins, or would result in a higher level of customer surrenders, reducing inflows.”

Goldman reinstates Standard Life Aberdeen at ‘buy’

Elsewhere in the wealth sector, Goldman reinstated its rating on merged life insurer and fund manager Standard Life Aberdeen PLC (LON:SLA) at ‘buy’ with a target price of 500p.

The bank’s analysts said: “We see it as well positioned in UK wealth, and believe its recent acquisition has added greater scale and diversification.”

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