Activist investor Edward Bramson recently bought a 5.16-percent stake in Barclays PLC (ADR) BCS.
The British bank reached a settlement last month in a Department of Justice probe over the sale of residential mortgage-backed securities, paying $2 billion in the bargain — less than half of what the regulatory body initially demanded.
The Analyst
Analyst Joseph Dickerson upgraded shares of Barclays from Hold to Buy and increased the price target for the bank's U.K.-listed shares.
The Thesis
Asymmetric upside optionality, the settlement of the RMBS litigation, better-than-expected capital return prospects and expectations that investors will look ahead to 2020 earnings are the factors underpinning Jefferies' upgrade of Barclays, Dickerson said in a Monday note.
The analyst forecast earnings of 27 pence per share; a dividend per share of 9.4 pence; and 4.4 billion pounds in prospective excess capital for 2020. A portion of Barclays' surplus capital could be used for share buybacks and special dividends, Dickerson said.
The activist interest could foster an acceleration in efficiencies at the investment bank and help to unlock upside optionality, the analyst said.
Jefferies sees Barclays' investment bank fix as a source of efficiency and capital return, with cost reductions, revenue generation or a combination of the two presenting at least a 900-million-pound pre-tax efficiency.
The Price Action
The Barclays ADR listed on the NYSE has gained 13 percent year-to-date.
The stock was up 1.02 percent at $12.33 at the close Monday.
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