Exane upgrades Barclays, says the fog is lifting

Exane said Barclays’ decision to cut the dividend and sell the African operations – announced in February – largely addresses the equity issue and gives more flexibility to improve efficiency in its capital base.

In addition, it said the earnings uplift as securities are extinguished is no longer a distant prospect.

“Our latest work increases our confidence in the longer term return potential of the group. We still see challenges to underlying profit progression and believe consensus might be too optimistic here, but the tailwinds from redemptions of capital securities provides a substantial offset,” Exane said.

Exane said it is now confident Barclays can boost earnings by about 20% and improve return on tangible equity by up to 2 percentage points over the next few years through debt restructuring alone.

It reckons much of this can be achieved by 2019 and said neither it nor consensus has this in the numbers.

Exane said the investment case for Barclays is building and the stock offers a total shareholder return of 23% over the next year.

At 1155 BST, Barclays shares were down 0.1% to 185.60p.