Barclays PLC's (LSE:BARC) surprise £450mln loss from its structured product blunder came at a bad time, said Credit Suisse, and while it still reckons the FTSE 100 lender will resume its share buyback shortly, it is likely to be cut down by a third.
With the outlook for capital markets this year already uncertain, Credit Suisse earlier this month cut its price target on the blue-eagle bank for the second time this year on the concern that Barclays equities and investment banking divisions to be weaker if lower risk sentiment was sustained.
With the full-year revenue outlook for the Barclays investment bank already under debate, it was hard for the market to look past the loss from the structured product, the analysts said.
They have not changed the target price again because, firstly the disclosed details of the loss "suggests causation by a clerical error albeit surprising", secondly that Barclays' FICC (fixed-income, currency and commodities sales and trading) strength "should now offset the one-off loss", and thirdly that some of the capital impacts in the quarter will be temporary.
The estimate for Barclays buyback has been snipped to £1bn from £1.5bn, "for now", and it is expected to be started shortly after first-quarter results at the end of April.
First-quarter results are expected to be impacted by the over-issuance loss and deferred tax asset write-downs from bank levy changes.
"However we think underlying results will come in better than expected," the analysts said, driven by FICC.
With the shares trading on a 2022 PTBV (price/tangible book value) of 0.55x, they added "despite the fact we prefer retail banking over capital markets trends we see the shares as oversold on the news flow without appreciating better FICC".