Close Brothers shares soar past target price whilst FTSE 100 banks sink
Shares in FTSE 250 lender Close Brothers rallied on Thursday morning whilst its banking rivals HSBC, Barclays and Standard Chartered tumbled.
The lender made gains as high as ten per cent during early trading before consolidating around five percent, as the bank clawed back recent losses.
Meanwhile, Standard Chartered led the FTSE 100 losses at nearly 10 per cent, Barclays sunk nearly seven per cent and HSBC fell over six per cent.
Close Brothers stock has taken a beating in the last six months driven by its ties to the car mis-selling scandal.
The saga headed to the Supreme Court this week, where Close Brothers sought to overturn the Court of Appeal’s October ruling that it was unlawful for banks to pay a commission to a car dealer without the customer’s informed consent.
Close Brothers shares plummeted nearly 25 per cent following the verdict and have remained volatile since.
The Supreme Court’s judgement could take up to several months, but the Financial Conduct Authority has said it will confirm industry-wide redress scheme within six weeks, if an adverse verdict is handed to the banks.
As the Supreme Court hearing began on Tuesday, the stock fluctuated over the course of the day.
Peel Hunt rated the stock a ‘hold’ in a note issued on April 1, and gave it a target price of 277.20p.
After making gains on Thursday, Close Brothers brushed past the analyst’s target to highs of 310p.
The analysts downgraded their estimate for Close Brothers full-year earnings per share by 15 per cent to 50.6p.
They also lowered guidance on the lender’s full-year net interest margin – an important metric used by banks showing the difference in price at a lender borrows and lends – to seven per cent, expecting it to reduce to 6.7 per cent in the second half.
RBC Capital Markets downgraded their target price for Close Brothers to 340p from 360p in a note issued last week, but reiterated an ‘Outperform’ rating, meaning they expect the stock to “materially outperform sector average over 12 months”.
However, analysts also assigned a ‘Speculative Risk’ qualifier to the shares, given the ongoing uncertainty with its motor finance case.