Berenberg raises target price on Barclays

21st Feb 2024 09:36

(Sharecast News) - Analysts at Berenberg raised their target price on banking giant Barclays from 240.0p to 270.0p on Wednesday, stating the stock's current level of returns remains "chronically undervalued".

Berenberg noted that Barclays plans to distribute more than £10.0bn of capital to shareholders during 2024-26, equivalent to roughly 40% of the bank's market capitalisation, even before including the roughly £1.8bn of capital distributions announced at its full-year 2023 results on 20 February.

The German bank also said the bank was not "shrinking to victory", with revenue targets for 2026 implying roughly £4.7bn in revenue growth versus 2023.

Berenberg stated that its 2026 revenue guidance was approximately £1.6bn below Barclay's own target, enabling about 11% FY 2026 return on tangible equity versus guidance for more than 12%. This is something the analysts, who reiterated their 'buy' rating on the stock thinks remains "chronically undervalued".

"Barclays' shares rose by 9% following its FY 2023 results on 20 February. Yet this still implies a de-rating versus our EPS upgrades of more than 10%. While our FY 2026E RoTE of circa 11% is circa one percentage point below guidance, this level of return is poorly reflected in Barclays' valuation, on 0.4x TBV," said Berenberg.

Reporting by Iain Gilbert at Sharecast.com