IG Group exposed to risk of further central bank interventions, Canaccord says

20th Jan 2015 11:54

The Swiss central bank last week shocked markets by announcing its decision to remove its three-year old cap on further strengthening in the Swiss franc.The event on 15 January led stockbroker IG Group to incur in £30m of losses which when the company published its latest half-year results, on 20 January, management attributed to client credit losses (£18m) and market losses (£12m).The firm's executives said they would seek to learn the appropriate lessons from that episode. Analysts Arun Melmane and Robin Savage at Canaccord Genuity want to know just what exactly those will be, they explained in research sent to clients following the release of IG's latest results.In particular, they point out how IG's numbers seem to indicate that a certain level of leverage was allowed for its client positions.Melmane and Savage wrote, "the recent loss event leaves the investment case far from risk-free in an environment with increased volatility and the possibility of further central bank intervention. The stock is at a premium rating of approximately 16 times forward earnings".Consensus tracking lower could also prove negative for sentiment, Canaccord said.The analysts reiterated their 'hold' recommendation and 650p target on the stock.