Deutsche Bank cuts Pennon rating to Hold as shares fall 9.9%

what happened

ShareCast reports that Deutsche Bank downgraded Pennon to ‘hold’. The bank continues to see a high probability of a successful turnaround, supported by strong new leadership. It said effective execution should leave the company in a much stronger position ahead of the 2030-35 regulatory period.

However, Deutsche Bank said the near-term case for buying the shares had become increasingly difficult. It cited the absence of clear medium-term guidance on earnings and returns, making it harder to assess whether Pennon is moving towards a stronger position. The bank also pointed to broadly stable earnings per share, forecasting EPS of 26p in 2026/27 and 25p in 2029/30. Its previous forecast had implied 9% compound annual EPS growth.

Deutsche Bank also said returns were below the cost of equity. For the remainder of the current regulatory period, it expects equity returns to average around 7% nominally, compared with 9.7%. At 0917 BST, Pennon shares were down 9.9% at 321.60p.

why it matters

The downgrade and limited expected earnings growth increased pressure on the utility company’s shares.

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