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Investing.com - RBC Capital downgraded Legal & General Group PLC (LON:LGEN) from Sector Perform to Underperform on Tuesday, while lowering its price target to GBP2.20 from GBP2.45.
The downgrade reflects Legal & General’s significant exposure to "intensifying competitive pressures and softening demand" in the UK pension risk transfer (PRT) market, where the company holds a leading position.
RBC analyst Mandeep Jagpal cited "emerging challenges" to Legal & General’s volumes and margins as key factors behind the more cautious stance, with RBC’s earnings and capital generation forecasts now 6% and 9% below consensus on average for fiscal years 2025-2027.
The financial services firm’s dividend coverage ratio of less than 1x over fiscal years 2025-2027 lags behind peers’ average of 1.66x, leaving "limited scope for DPS growth beyond FY27," according to RBC’s research note.
RBC also pointed out that Legal & General’s dividend yield spread versus gilts has narrowed and "now also appears expensive relative to the sector," further supporting the downgrade decision.
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