Citi cuts PT on Australia's Liberty Financial as bad debts worsen amid rate hikes

Liberty

08/08/2022 01:42

** Citi cuts PT on Liberty Financial Group  LFG.AX  to
A$5.40 from A$6 as valuation weakens to historical lows amid
rising interest rates
    ** Says rising funding spreads, softening loan growth, and
worsening bad debts will lead to earnings decline at the
non-bank lender over the next two years
    ** New PT is at a 25.6% premium to the stock's last close on
Friday
    ** Brokerage sees rising bad and doubtful debts (BDD)
expense as interest rates are hiked
    ** Widening funding spreads should drive lower NIMs (net
interest margin) delivering a falling earnings trajectory until
FY24 - Citi
    ** Citi believes double-digit unfranked dividend yield
should attract income-orientated investors back into stock
    ** Three of six analysts rate the stock "buy" or higher,
three "hold"; their median PT is A$4.68 – Refinitiv data
    ** LFG stock down 22.8% this year, as of last close
    

 (Reporting by Savyata Mishra in Bengaluru)
 ((Savyata.mishra@thomsonreuters.com))