Barclays downgraded to 'sell' by Goldman on capital concerns

Goldman Sachs has downgraded Barclays to 'sell' from 'neutral' and lowered the bank’s target price by 28% to 180p, citing concerns about a potential narrowing of its capital gap.

The US bank said on Friday that a question remains about whether Barclays will have to build capital in order to narrow the gap between it and its UK and European IB peers.

"Since the beginning of the year, the capital gap between Barclays and its UK and European IB peers has widened meaningfully. The key question is whether Barclays will need to continue to build capital to narrow this gap, while its peer group focuses on capturing revenue growth," Goldman said in the note.

GS said Barclays is not likely to opt for an external capital raise in order to bridge the gap, but that alternative measures - such as incremental asset cuts or maintaining the current level of dividends for longer - are not without cost.

Regulatory hurdles will also be a hindrance to Barclays in coming quarters, according to Goldman.

"One of Barclays' key franchise strengths is its presence as a transatlantic corporate and investment bank (with operations across the US, the UK and Europe). However, we believe this structure could mean that the group is impacted (more so than peers) by significant change in the regulatory environment."

Barclays shares were down 1.46% at 208p at 1030 BST.