Broker snap: Barclays results are 'underwhelming', says Nomura

31st Oct 2012 10:33

Nomura has maintained its 'reduce' rating and 210p target price for UK banking giant Barclays, labelling the firm's third-quarter results as 'underwhelming'.The broker said in a 'First Look' research report that, given Barclays had pre-announced, the focus was on whether the underlying mix of earnings was better. "Relative to our expectations, BarCap was weaker and Head Office was better, which we find uninspiring. In terms of group earnings, income and costs were both lower than our expectations (a function of our higher BarCap expectations) and LLPs were better."Margins had fallen from the first half to the third quarter, which the broker said is a negative read-across for other UK banks. Meanwhile, while UK asset quality was good, UK lending growth was "lacklustre". There was also some deterioration in European asset quality, the broker said.Nomura also highlighted some comparisons with Swiss bank UBS, which recently announced that it was down-scaling its investment bank, which includes some 10,000 job cuts. The broker said: "The FICC [fixed income, commodities and currencies] franchises at these institutions are different (c.2x market share for BarCap), implying Barclays will have a lower level of underperforming assets than UBS. BarCap makes over half the group profits while at UBS the contribution is about half that, so relative importance to the group is much higher."Having said that, Barclays does face intense pressure from the regulators to go deeper and in recent months capital markets have improved materially. Nonetheless, as UBS showed, restructuring will go on for a long time in an environment where other banks are also deleveraging and risk uncertainty persists."BC