Barclays starts CYBG at 'underweight', says margin to disappoint

23rd Oct 2018 10:14

(Sharecast News) - Barclays initiated coverage of CYBG at 'underweight' with a 280p price target on Tuesday as it said margins were likely to disappoint.The bank's earnings estimates are around 10% below 2020 consensus on lower revenues, as it expects net interest margin to disappoint as it comes under pressure from asset margin compression and rising funding costs, with relatively limited support from rate hikes."Despite the recent sell-off, we still see the shares as expensive," Barclays said. It added that despite falling 26% from their recent peak, the shares trade at what it sees as an unjustified premium of around 30% versus Lloyds and RBS on an estimated 2020 price-to-earnings basis."With a likely sluggish UK macro, and little system growth, we expect mainstream challengers to struggle versus strongly capitalised, highly liquid incumbents (with legacy issues largely resolved) fighting for share in key challenger product lines, curbing challenger volume aspirations and squeezing margins," it said.As far as CYBG's merger with Virgin Money is considered, Barclays said it likes the move but sees no real change to CYBG's competitive firepower.At 1330 BST, the shares were down 3.3% to 258.60p.