Barclays Downgraded By This Wall Street Firm: Here's Why

• The share price of Barclays PLC (ADR) BCS has declined 16.08 percent over the past three months, touching a low of $13.61 on November 13.
• Morgan Stanley’s Chris Manners has downgraded the rating on the company to Equal-Weight, while lowering the price target from 310p to 250p.
• Manners believes there could be risk to the consensus earnings forecasts for the company, as well as a reduction in the dividend estimate, driven by a “tougher than expected capital regime.”

Analyst Chris Manners sees the company “as the most challenged with respect to our cautious stance on the increasingly tough capital regime for the UK banks.”

Manners expects the acceleration in non-core rundown by 2017 to reduce the drag on the ROE in the U.K. banking sector.

According to the Morgan Stanley report, “As the mix shifts towards PCB/Barclaycard and better cost discipline is shown in the IB, we think core returns can recover from c.8 percent in 2014.”

Manners expects Barclays to build towards steady-state CET1 ratio of c.13.5 percent over time, as compared to the current less than 12 percent targeted by management, “as higher buffers combine with stress testing to constrain returns and dividends.”

The earnings estimates for 2016-2018 has been reduced by 12-15 percent, to reflect lower revenues driven by a more constrained balance sheet, which in turn is due to the need to build toward higher capital thresholds.