Barclays' strategic review, to be announced on 20 February, can be the catalyst for a re-rating of the bank after years of underperformance, according to analysts at US rival JP Morgan.
“The bank has traded at a material discount to tangible book for over a decade, with the equity story out of favour with many investors, but at current valuations, we believe that the stock retains significant upside potential which can be unlocked.”
JP Morgan expects the review to focus on the return on tangible equity target, cost plans and the associated cost/ income target.
Capital distribution targets are also expected to be tightened, with JP Morgan expecting some £9bn or 37% of market cap to be handed out over the period 2023-25, which is above the average for the sector.
No major strategic changes are expected by JP Morgan, which sees the investment bank as staying core to Barclays’ plans even though it is becoming an increasingly large, and volatile, part of the bank’s asset base.
Money for investment will be selective, especially with businesses such as cards becoming more capital intensive and potentially affecting the amount available for distribution and making the business overall more cyclical.
'Overweight' with a 180p target is the investment view.
Shares today rose by 1.7% to 147.3p.