Barclays PLC (LSE:BARC) shares are in the bargain bin, according to stockbroker Shore Capital, which called the British bank “grossly undervalued” whilst its shares fell 4% on Thursday.
Shore Cap analyst Gary Greenwood, in a note following this morning’s interim results, said that Barclays is currently “one of the most attractive stocks” in its coverage, whilst repeating a ‘buy’ recommendation.
Noting just how downtrodden the Barclays price has become, Greenwood pointed out that the share price is down 16% in the year to date and is 27% beneath its 12-month high, which was set at 217p.
“There is currently 90% upside to our last published fair value of 300p, which is based on the group achieving a sustainable return on tangible equity (RoTE) of 10% longer-term and is therefore in line with management targets,” the analyst said.
Greenwood earlier this week said Lloyds Banking Group was “misunderstood and mispriced” by the market.
On Thursday, Barclays shares fell 6p or 3.8% down to 151.62p after the bank flagged a slump in profits and flagged £1.3bn had been set aside for litigation and conduct charges in the second quarter. It came after the bank was hit by an error, made in 2019 but discovered in the quarter, related to structured investment products.
Barclays said it expects to incur total operating expenses of £16.7bn in 2022, up from its previous guidance of £15bn. It is targeting a return on tangible equity greater than 10% for the year after generating a return of 10.1% in the first half of the year.
The bank posted a statutory pre-tax profit of £3.7bn for the first half of the year, 32% less than the £4.9bn it posted for the equivalent part of 2021.Group income rose 10% year on year to £13.2bn in the first half. The bank said it had “strong income momentum” across all of its operating businesses.
It is, meanwhile, benefitting from higher interest rates and transaction-based revenues, whilst the consumer, cards and payments segment had an increase in transactions.
ShoreCap, in its note, forecast Barclays will make a £6.9bn of profit before tax for the full year (versus market consensus of £6.6bn.
“Despite additional costs associated with the over-issuance of structured products in the US, management has reiterated its previous guidance for a full year RoTE of >10%, which is better than the current consensus of 8.3%,” Greenwood said.