UBS has said that it still sees 'attractive diversification' and upside potential in the long term at market operator London Stock Exchange (LSE), but has maintained its 'neutral' rating on the shares for now.

"We view LSE's diversification away from volume related revenue streams and the addition of index, technology and post trade services as starting to show encouraging signs of success (contract wins at FTSE, technology sales and small development in new asset classes). We also see some upside from cost control in the longer run," the broker said.

"However we believe that this upside is fully reflected in the shares, we reiterate our 'neutral' rating."

Concerning the deal to acquire up to 60% of LCH.Clearnet, LSE said last week that it has made progress in navigating the regulatory and anti-trust red tape, with approval received from the French lead regulator, ACP.

UBS said: "Following recent publication of EMIR draft rules and the significant increase in capital requirements of LCH by €300-375m, diluting the ROIC [return on invested capital] in 2016 to 8%, uncertainty remains on the value of the deal."

The broker highlighted that discussions between the LSE and bank shareholders/users are currently underway but "the scope and nature" of the talks remain undisclosed.

UBS has lowered its price target for the shares from 990p to 960p.

The stock was down 2.18% at 965.5p in mid-morning trade on Tuesday.

BC

Related share prices
London Stock Exchange Group (LSE) share price