With Commonwealth Bank of Australia (ASX: CBA) shares regarded as overvalued by many analysts, investors may be better off looking at other ASX financial stocks. But which one?
Bell Potter thinks Perpetual Ltd (ASX: PPT) could be worth a closer look, even after a softer quarter for the asset manager.
Image source: Getty Images
What is the broker saying about this ASX financial stock?
Bell Potter described the second quarter as underwhelming, driven by fund outflows in its Asset Management division and limited progress on the sale of its Wealth Management business. The broker said:
Overall this was an underwhelming quarter with lower AUM down 2% and limited progress on the sale of Wealth Management (WM). In Asset Management, AUM was A$227.5b vs A$232.0b at end of Q1. Outflows were A$7.8b or 3.4% of opening, with outflows concentrated at Barrow Hanley and TSW, (3.7% and 11.2% of opening values respectively).
Market and other movements were +A$5.4b or 2.3% of opening while FX moves were -A$2.1b (or 0.9% as the US$ weakened over the quarter. Performance fees are expected to be A$10m in H1.
But it wasn't all bad news. Bell Potter noted that parts of the business continued to grow, particularly within Corporate Trust:
Wealth Management Funds under Advice were flat at A$21.9b. Corporate Trust saw Funds under Administration grow 2.1% over the quarter to A$1.3trn, with Debt Market services up 2.8% and Managed Funds up 1%.
Costs remain under control
Bell Potter also highlighted that cost control remains a positive for the ASX financial stock, with currency movements helping keep expenses toward the lower end of guidance. The broker said:
FY26 costs are tracking at the lower end of the 2-3% guidance, helped by currency moves. The first half should be better than guidance. Significant items are expected to be between A$54-63m after tax, with no impairments. Excluding impairments, this level is slightly below the average of the last few half years.
Why Bell Potter is still a buyer
While Bell Potter trimmed its price target following forecast downgrades, it remains positive on Perpetual's valuation and longer-term strategy. The broker explained:
We remain positive on PPT, given what we consider an undemanding valuation. The drawn-out sale process for WM is disappointing, and we would like to see WM sold, debt reduced and management focused on delivering efficient and profitable growth.
We agree with the new CEO's strategy to take the initiative and find new strategies to add to existing platforms, and the inflows seen in the Perpetual Diversified Income Active ETF are encouraging.
According to the note, the broker has retained its buy rating on the ASX financial stock with a trimmed price target of $22.80 (from $25.00). Based on its current share price of $18.99, this implies potential upside of 20% for investors over the next 12 months.
In addition, Bell Potter is forecasting a generous 6.3% dividend yield in FY 2026, which boosts the total potential return to approximately 26%.
