Barclays PLC (LSE:BARC) may be facing a potential US tax squeeze, but analysts at Keefe, Bruyette and Woods is urging investors not to jump to conclusions.
In a recent note, the firm highlighted that while proposed US legislation could theoretically lead to higher tax bills for Barclays, the likelihood of it materialising in full appears low.
New US tax clause raises eyebrows
The concern stems from Section 899 of the US “One Big Beautiful Bill Act,” passed by the House of Representatives in May.
The clause targets foreign companies operating in the US whose home countries impose what the US deems “unfair” taxes. Digital service taxes are explicitly named, putting the UK on a potential watchlist.
If enforced, the rules could result in additional taxes on income generated by US subsidiaries of companies such as Barclays. With its substantial operations across the Atlantic, the bank is seen as exposed.
Patience urged
Despite the potential for added costs, KBW maintains its 'outperform' rating on Barclays with a price target of 390p, implying around 19% upside from current levels.
The analysts acknowledge that the numbers could look material but argue that the political intent behind the provision is not to raise revenue.
“The title of Section 899 makes the aim clear,” the US broker writes, noting that the legislation appears designed to apply pressure on countries like the UK to roll back digital taxes rather than collect new funds from foreign firms.
It expects the UK and US to reach a negotiated outcome that neutralises the threat before it ever bites.
Investment case remains intact
While the tax headline has made waves, KBW is sticking to its wider investment case for Barclays.
The bank’s restructuring progress, capital returns, and interest rate backdrop continue to support the share price. For now, the firm sees the political developments as background noise rather than a change in fundamentals.
In short, Barclays may be in the frame, but this looks more like diplomatic leverage than a direct threat to profits.