Berenberg has reiterated its bearish stance on Aviva (LON:AV), flagging concerns over the insurer’s plans to return capital to shareholders. The comments come after Goldman Sachs pointed to concerns over the FTSE 100 group’s balance sheet last week.
Aviva’s share price closed marginally lower yesterday, shedding 0.19 percent to 513.00p, slightly underperforming the broader London market, with the benchmark FTSE 100 index ending the session 0.01 percent lower at 7,348.94 points. The insurer’s shares have added just under 20 percent over the past year, and are up by some five percent in the year-to-date.
Berenberg reiterated its ‘sell’ stance on Aviva yesterday, while raising its price target on the shares from 440p to 456p, flagging concerns over the group’s balance sheet.
“When we first heard talk of a share buyback we thought it might be a joke, but apparently not,” the broker’s analyst Trevor Moss commented, as quoted by Citywire, adding that the move “seemed to be designed primarily to boost sentiment when the company should be focusing on strengthening the balance sheet further, paying down debt and investing in the operations”.
The comments come after Goldman Sachs warned last week that Aviva’s plans to return capital to shareholders would ‘prolong the process’ of building up the insurer’s balance sheet.
Berenberg’s Moss further pointed out that given the ‘lack of growth potential’, as well as an ‘increasing squeeze on profits,’ he suspected that the FTSE 100 insurer might be heading for another acquisition.
The 18 analysts offering 12-month price targets for Aviva for the Financial Times meanwhile have a median target of 525.00p on the shares, with a high estimate of 608.00p and a low estimate of 420.00p. As of April 10, the consensus forecast amongst 21 polled investment analysts covering the blue-chip insurer has it that the company will outperform the market.