Challenger Limited: Pause for breath; downgrade to Neutral

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Challenger Limited: Pause for breath; downgrade to Neutral

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Challenger Limited

Pause for breath; downgrade to Neutral

Rating Change: NEUTRAL | PO: 10.00 AUD | Price: 9.77 AUD

Valuations full, catalysts known; downgrade to Neutral 19 June 2026

After strong outperformance since the start of 2025 (CGF shares are up 62% vs the Equity

wider market up just 9%), we downgrade shares to Neutral. We lower our normalised

profit forecast by 1% over FY26-28E reflecting the loss of earnings from Fidante, but

Key Changescost synergies from its merger with Channel Capital mean limited changes in outer

years. Our PO is unchanged at A$10.00 suggesting <6% total return potential. We (A$) Previous Current

believe the outlook remains attractive, supported by ongoing capital return and earnings Inv. Opinion B-1-7 B-2-7

growth (BofAe 10% normalised EPS CAGR over FY26-28E). We see scope for further Inv. Rating BUY NEUTRAL

capital to be unlocked as CGF shifts its Life portfolio asset allocation, which we have 2027E EPS 0.75 0.74

reflected in our valuation (BofAe A$0.94 benefit, or A$560-730m release). However we 2028E EPS 0.82 0.81

believe this is now well understood and valuations look fair. Downgrade to Neutral.

Freya Kong >>

Challenger merges Fidante with Channel Capital ResearchMerrill LynchAnalyst(Australia)

Challenger has announced a merger between Fidante, its third party asset management +61 2 9226 5840 freya.kong@bofa.com

business, with Channel Capital (an integrated solutions platform for fund managers) to

Stephanie Deeb >>

form Channel Group, of which Challenger will retain a 45% stake and receive A$172m in Research Analyst

cash. The enlarged group will combine Fidante’s A$86bn of FUM with Channel Capital’s Merrillstephanierebecca.deeb@bofa.comLynch (Australia)