Barclays PLC (LSE:BARC)'s stock is subdued amid an outlook of “extreme” pessimism in the investment banking sector, according to analysts at Berenberg bank.
Analysts at the bank cut their price target, the price where they expect Barclays’ shares will reflect fair value, on Wednesday from 260p to 240p but reiterated a ‘buy’ recommendation.
They said that while Barclays “can generate acceptable returns, including in its investment bank (IB). IN order to re-rate, the bank must prove that the recent level of its returns is sustainable.”
Consensus investment banking revenues for the bank in 2025 are consistent with a “normal” year, they added.
“Barclays’ valuation is subdued, even relative to global IB peers. This is hard to justify given its presence in the US market (where returns are higher than in Europe) and market share gains (including versus US peers),” Berenberg analysts wrote in a broker note on Wednesday.
“While the precise trajectory of global banks’ IB revenues is uncertain, our analysis indicates that consensus IB revenues for Barclays in FY 2025 are consistent with a ‘normal’ year. Retrenchment by peers and higher interest rate volatility may provide additional support.
“Our analysis also suggests that Barclays’ share price is discounting an IB RoTE of 5.6%, versus a 12-month average RoTE consistently in excess of 10% since Q1 2021.”
Barclays' shares are currently trading at about 157.76p per share on the London Stock Exchange.