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St. James’s Place knocked to ‘neutral’ by Credit Suisse as market volatility expected to slow asset growth

Analysts said they believed the insurer’s current stock price was “close to fair value” given the challenging asset gathering environment as it had benefitted from the UK’s pensions freedom legislation

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CS said key risks to the firm included any changes to the UK's pension legislation

St. James’s Place PLC (LON:STJ) has been downgraded to ‘neutral’ from ‘outperform’ by analysts at Credit Suisse as the bank forecast slower growth for assets under administration (AUA), driven by near-term market volatility.

In a note, analysts said they believed the FTSE 100 insurer’s current stock price was “close to fair value”, given the challenging asset gathering environment as it had benefitted from the UK’s pensions freedom legislation which had allowed individuals to stay invested in equity and bond markets rather than converting pension pots into an annuity, which in turn extended the amount of time the money stayed with the firm.

READ: St. James’s Place, Standard Life Aberdeen, and Hargreaves Lansdown downgraded as Deutsche Bank turns negative on insurers

However, Credit Suisse said these flows would come under pressure as bond yields rose and increased market volatility, leading clients to delay the consolidation of existing defined contribution pension pots with the company, particularly given the high fee structure during a market downturn.

As a result, the analysts forecast average netflow growth for the firm of 10% from 2019 to 2021 compared to 20% between 2014 and 2018.

The bank also cut its target price for SJP to 965p from 1,150p, saying key risks to the firm included changes to UK pensions legislation that could impact individual tax-free savings allowances or a review by the Financial Conduct Authority of its pension withdrawal charges.

In lunchtime trading Tuesday, St James’s shares were down 1.9% at 965.4p.

Quick facts: St. James's Place

Price: 1026 GBX

LSE:STJ
Market: LSE
Market Cap: £5.48 billion
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