Investec upgrades Barclays to 'buy'

Investec upgraded Barclays to ‘buy’ from ‘hold’ and lifted the price target to 200p from 195p.

FTSE All-Share

4,411.85

15:45 15/11/24

n/a

The brokerage said that it acknowledges the rationale for an element of near-term caution in the context of the likely impact of a fresh PPI charge and pension headwind in the third quarter.

However, given the likelihood of a substantial third quarter consensus beat on 27 October and a now material £/$ tailwind for earnings/tangible net asset value, the stock is a little too cheap trading on 0.6x 2016-18e tNAV.

Investec forecasts a further £500m PPI charge in Q3 which, along with pension headwinds, should preclude any capital build in the quarter.

However, it estimates pre-tax profit of £1.72bn, which is 33% ahead of company-compiled consensus.

“Clearly there is fresh encouragement for Investment Banking revenues in the context of strong FICC performance from JP Morgan, Citigroup and Bank of America (all not rated) – up 48%/35%/39% year-on-year respectively in Q3 2016,” the brokerage said.

At 0934 BST, the shares were up 1.4% to 176.45p.