In a note to clients, the broker’s analysts noted that Aldermore’s shares are up 38% since the beginning of September “amidst an improved perception of the UK economy, and a better than expected 3Q16.”
But, they added: “We think there is still upside from here, driven in particular by falling funding costs.”
As a result, they hiked their price target for Aldermore to 257p from 194p.
In reaction, Aldermore shares were up 3.4%, or 7.7p at 236.0p in mid-morning trading.
The Deutsche Bank analysts noted that on “today’s advertised deposit rates, we estimate a flow cost of deposits of c.1%, compared with 1.8% at 1H16.”
They added: “We expect the majority of this benefit to flow through over the next two years, helping offset asset pricing pressure and providing Aldermore with a stronger buffer against falling margins than other UK peers.“