Legal & General Group PLC (LSE:LGEN) shares fell 1.7% on Wednesday, following a downgrade from Citi, which cut its rating to 'sell' from 'neutral' based on valuation concerns. The downgrade comes after the company's first-half results, during which Citi reduced its remittance forecasts for 2026 and 2027 by 4.5%. Remittances represent the cash that Legal & General's operating businesses send to the parent company, crucial for funding dividends.
Downgrade Details
Citi's downgrade reflects lower volumes in pension buyouts, which are being written at thinner margins in the bulk annuity market. However, the bank noted that stronger asset management profits, aided by a lower cost-income ratio and an additional £100 million per year from asset optimization actions, partially offset these concerns. Citi also lowered its target price for L&G shares by 2.3% to 245p, suggesting a negative expected total return of 15.4% from current trading levels.
Earnings Outlook
Despite the downgrade, Citi projects core operating earnings per share will grow by 8% this year, slightly below the company's own guidance of 9%. Dividend estimates remain unchanged at 6.24p for the first half and 21.8p for the full year. The bank's analysis indicates that the stock has already risen 19% in 2026, leaving little room for further gains amid a challenging market for large pension deals.
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The downgrade is likely to pressure L&G's share price further, potentially affecting investor sentiment in the financial services sector. The broader FTSE 100 index was also down 27 points amid a generally weak market environment.
Watch for upcoming earnings reports from other financial firms, which may influence market sentiment and provide further context for L&G's performance.
Based on reporting by: proactiveinvestors.co.uk