Market Overview

Barclays Notches Sell-Side Upgrade On Capital Progress, Dwindling Regulatory Risks

Barclays Notches Sell-Side Upgrade On Capital Progress, Dwindling Regulatory Risks
Related BCS
May's Brexit Plan Defeated: Here Are The Markets' Winners & Losers
52 Biggest Movers From Yesterday
Earnings Heat Check (Stocks To Watch Podcast) (Seeking Alpha)

Goldman was previously a Barclays PLC (ADR) (NYSE: BCS) bear due to concerns about the capital building the company had to undergo to narrow the gap to its U.K. and EU investment banking peers and meet financial regulations. The firm's thesis on the UK banking giant changed Thursday.

The Analyst

Goldman Sachs analyst Martin Leitgeb upgraded Barclays from Sell to Neutral and increased the 12-month price target for its U.K.-listed shares by 10 percent.

The Thesis

Barclays has reduced the balance sheet of its U.S. intermediate holding company, or IHC, by 21 percent since the fourth quarter of 2016, Leitgeb said in a Thursday note.

The U.S. IHC consumed $14 billion of Tier 1 capital compared to $18 billion the fourth quarter of 2016, Leitgeb said.

"We believe this can be attributed (at least in part) to the rebooking of assets elsewhere within the group's structure," the analyst said. "This implies greater capacity to capitalize the 'stump' within Barclays' non-ring-fenced bank." 

Goldman's Common Equity Tier 1 — a banking regulation metric — estimate for Barclays' American holding company increased from 10.4 percent to 12.5 percent. 

Goldman sees receding financial regulation risk in the wake of recent commentary from the Fed that suggested greater flexibility in the application of Foreign Banking Organization rules as well as the intention to revisit the Volcker rule.

Barclays has not sounded out any upward pressure on its group capital targets, unlike some of its U.K. peers, Leitgeb said. 

Citing an expected UK rate increase and a lower tax,Goldman raised its earnings per share estimates for the 2018 to 2020 period by 4-6 percent. This, along with Barclays' stronger Q4 capital progression, led to the price target revision, the analyst said. 

The Price Action

Barclay's U.S.-listed ADRs are up about 7 percent over the past year.

Related Links:

Banks Vs. Credit Unions

Powell Prompted Inflows To Financial Services ETFs

Photo by Deadly437/Wikimedia. 

Latest Ratings for BCS

Nov 2018Credit SuisseDowngradesOutperformNeutral
Oct 2018BerenbergUpgradesHoldBuy
Jun 2018Bank of AmericaDowngradesBuyNeutral

View More Analyst Ratings for BCS
View the Latest Analyst Ratings

Posted-In: banking financials Goldman Sachs Martin LeitgebAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (BCS)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Are Robo-Advisors Enabling Younger Investors Or Are They Helicopter Advisors?

Peak Resorts Q3 Earnings Outlook