Barclays rallies on Exane upgrade

Exane pointed out that having been cautious on the stock for two years, it “made the mistake” of upgrading the recommendation shortly before the UK’s vote to leave the European Union, downgrading it back to ‘neutral’ again afterwards as it awaited more certainty on the economic outlook.

Exane said Barclays’ core first-half pre-tax profit was 10% ahead of consensus thanks to better pre-provision profit.

In addition, it said the bank provided comfort on both the capital outlook and access to the EU financial services market.

“Taken together, this has reignited our view that the bank could call all of its expensive preference shares over the next year adding over 10% to core earnings. Attention should then turn to other expensive capital securities that depress earnings by another 15%. This will help to offset other sector wide pressures.”

Exane maintained its ‘neutral’ ratings on RBS and HSBC, with Lloyds and Standard Chartered kept at ‘underperform’.

It said the banks’ first-half numbers “threw up few surprises with the focus therefore on outlook statements”.

“With the sector appearing to face a combination of slowing loan growth, lower margins and higher impairment, our sizeable EPS cuts post the vote to leave the EU look - at this early stage – to be justified.”

At 0913 BST, Barclays shares were up 4% to 158p.