M&G PLC (LON:MNG) shares have been downgraded by Deutsche Bank as it cast doubt on the fund manager’s dividend outlook.
First-half results were surprisingly solid, that bank's analysts said, thanks to better than expected costs and exceptionals, with management also reiterating the group's 2020-2022 capital generation target.
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“As we dig deeper, however, the picture looks less engaging,” said Deutsche analyst Oliver Steel in a note to clients.
While costs were lower than expected in the first half, ultimately he predicts that revenue pressures will “prove the stronger force”.
Likewise, the analyst now believes that the capital generation target “can only be achieved through another reinsurance deal, which may merely accelerate value rather than adding to it, and could at that stage prompt a re-basing of the dividend”.
The dividend yield, which the consensus has at around 10%, is “attractive”, the analyst said, but with no catalysts to justify a re-rating of the shares, Deutsche’s recommendation was downgraded to ‘hold’ from ‘buy’.
M&G’s share price target was also cut to 195p from 210p.
The shares fell 3% to 169.2p on Thursday morning.