Broker tips: Metro Bank, Pets At Home, Hiscox

(Sharecast News) - Analysts at RBC Capital Markets hiked their target price on retail and commercial bank Metro Bank from 170p to 195p on Thursday, noting that the lender was now further along in executing its turnaround strategy and should benefit from a higher‑for‑longer interest‑rate environment. RBC has shifted its valuation base year to FY28 and argued that treasury asset repricing should help limit downside risks, while Metro may also be less exposed to potential UK political headwinds such as higher bank taxes.

RBC described Metro as an "idiosyncratic story", noting that the bank's share price correlation with the large UK lenders has averaged around 54% since its IPO, compared with roughly 40% for other specialist and smaller lenders.

The Canadian broker said Metro's successful FY23 recapitalisation and progress on its strategic reset had been followed by a marked rise in correlation with the major banks through late 2024 and 2025.

Metro's shares have outperformed the larger UK peers by about 35 percentage points year‑to‑date, and RBC believes further gains were possible as the bank remains a clear beneficiary of elevated rates.

RBC said Metro's valuation still looked undemanding, trading at around 0.8x its FY28 estimated tangible book value for a forecast return on tangible equity of roughly 18.5%. It sees scope for a further re‑rating of around 40-85% based on valuation benchmarks across UK, Irish and Continental European banks.

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Shares in Pets at Home were pulling back on Thursday after surging the previous session as markets welcomed the pet products and veterinary group's full-year results, with broker Canaccord Genuity reiterating its 'buy' rating on the stock.

Full-year results were in line with expectations and company guidance, with strong growth in the vet side of the business offset by a weaker retail performance.

However, what was more positive were signs of early momentum building in PAH's retail turnaround, according to Canaccord Genuity.

"We take encouragement that the Retail turnaround plan announced last November has delivered early signs of progress, with improved volume trends, stronger customer metrics and sequential sales improvement in H2 following price investment and execution initiatives," the broker said.

"Product availability, value perception and customer satisfaction have all improved, with the benefits of new ranges set to come later this year."

Canaccord Genuity said the stock trades at FY27 price-to-earnings ratio of 11.8x, falling to 10.5 on FY28 estimates, with a FY27 dividend yield of 4.3%.

"We are encouraged by the early traction in the Retail turnaround plan and believe delivery from initiatives to restore Retail profitability remains a key tenet of the investment case," said Canaccord, which maintained a 245p target price for the shares.

Peel Hunt downgraded Hiscox on Thursday to 'add' from 'buy' after a strong share price performance and citing a full standalone valuation.

The broker, which remains positive long term, said the shares have enjoyed a strong performance, driven by healthy cash flows from the wholesale business, together with accelerating premium growth and better margins in retail.

"In addition, $200m of cost savings should continue to support margins into FY28E," said Peel Hunt, which also said the investment leverage of 2.7x and the roughly 4% current yield further underpin returns, on top of healthy and diversified underwriting margins.

"We lower 2026E headline EPS by 1% (adjusted EPS -4%) and by 6% in FY27E (adjusted EPS -4%)," it said, adding that there is no major change in its estimates for FY26 NAV or DPS. "Sustainable underwriting margins, combined with attractive insurance gearing, underpin solid mid-teens tangible returns on equity."

The broker lifted its price target to 1,960p from 1,790p, which offers 8% potential upside from current levels.