Broker tips: Barclays, Norcros
Macquarie stayed at 'underperform' on shares of Barclays ahead of the lender's second quarter numbers due on 28 July, telling clients that management's front-loading of expenses - particularly those related to ring-fencing its UK bank - was set to combine with softer revenues at its investment banking arm during the second quarter, weighing on its return on capital.
Furthermore, the Australian broker identified several headwinds which would stymie the lender's efforts to strengthen its capital buffers.
Indeed, it cut its estimate for Barclays's second quarter return on tangible equity from 7.6% to 6.5%, meaning less resources would be available to increase its common equity Tier 1 ratio.
Barclays was one of only five stocks covered by Macquarie which had yet to reach their CET1 target, the broker said.
Regarding the investment bank, Macquarie pointed out how its peers had been guiding towards a between 10% and 15% drop in its markets revenues.
The lender had also indicated accelerated non-core revenue losses ahead of the unit's wind-down, which would weigh further on its income.
As for the capital headwinds facing the group, Macquarie now saw litigation costs related to RMBS, PPI claims and Qatar likely in excess of £2.5bn.
Barclays might also choose to announce the results of its triennial pension funding review alongside its next quarterly financials.
The analysts said the review would not change the near-term calculus, but it would provide clarity about the CET1 headwinds out to 2026 (at a cost to its capital ratio of nearly 20 basis points out to 2021).
Analysts at Canaccord Genuity hiked their target price on shares of Norcros, telling clients it was "potentially" the most undervalued stock in its sector.
On the back of the above, they revised up their estimates for the company's revenue and earnings before interest, taxes, depreciation and amortisation over the next two years by roughly 3% and 12%, respectively.