Broker snap: Barclays a purchase for the long term

4th May 2010 12:40

The first quarter performance by Barclays was a disappointment to Nomura Securities but the Japanese broker is sticking with its positive rating for the UK banking giant.Revenues at the investment banking arm Barclays Capital were lower than Nomura had been anticipating though this was partially offset by lower than expected impairment charges. Underlying profit came up some 15% short of Nomura's expectations and as a result it has trimmed its longer term earnings estimates.The broker remains bullish on the sector and that includes Barclays. "At a valuation of 1.0x our estimate of end 2010 book value, we regard the shares as attractive," Nomura analyst Robert Law asserts. "We would argue the group's longer term RoE [return on equity] is likely to be above UK peers and over the cost of capital. However, short term momentum was disappointing compared with strong expectations and relative to performance from US peers. Consequently, while we continue to see value in the shares longer term, short term momentum appears to favour banks with greater leverage to improvement in credit costs," the broker concludes.