RBC Capital cuts Rathbones price target after regulatory update

18th Jun 2026 13:00

(Sharecast News) - RBC Capital Markets cut its price target on Rathbones on Thursday to 1,950p from 2,400p following the company's surprise regulatory update earlier in the week, which it said will likely complicate and lengthen the group's turnaround story.

On Tuesday, Rathbones announced it expects to incur £60m of additional costs over the next two years as it implements changes to address issues identified in a review of its wealth management business.

RBC said it was updating its forecasts following the regulatory update.

It said: "This includes: 1) the cessation of investment management fees on client cash; 2) lower net flow forecasts, principally reflecting the pause of onboarding new EDD [enhanced due diligence] clients and lower inflows from existing EDD clients for the next 12 months; 3) higher assumed investment performance for Q2 FY26, reflecting the rebound in markets since the 1Q trading update."

The net impact of these movements to earnings per share across FY26E/ FY27E/FY28E is -5%/-2%/-6%, the bank said.

RBC said: "The regulatory update issued by the group has arguably complicated the investment case in the near term by adding uncertainty around the outcomes of reviews in to client outcomes and 'aspects of pricing', and likely delays the inflection to positive organic growth (where the market may now look to net flows ex EDD clients for evidence of underlying improvements).

"We still expect the group to embark on a multi-year journey of improvement under CEO Jonathan Sorrell, better positioning the group to capitalise on the considerable opportunity for growth.

"Taking this into account we see an attractive overall risk/reward skew in Rathbones shares. On our updated numbers the stock is trading at less than 9x FY27E P/E, which we believe places it among the cheapest Wealth Managers in the world."

RBC said this overlooks the group's market positioning and the potential appeal it could offer to an acquiror looking to achieve scale in the UK wealth market. It maintained its 'outperform' rating on the stock.

At 1300 BST, the shares were down 1.8% at 1,600p.