Broker snap: Nomura ups Barclays to 'buy'

17th Nov 2009 12:02

The Barclays share price has undergone a correction since Qatar's sovereign wealth fund sold half of the warrants it holds in the UK bank back in mid-October, meaning the shares trade barely above Nomura Securities' estimate of year-end tangible book value per share (TBVPS).The broker has raised its recommendation on the shares to 'buy', with a price target of 425p, saying that normalised earnings expectations also support the shares.Annualising the third quarter profits before impairment charges, and normalising impairments, would imply normalised earnings per share of 55p, which would put the shares on a price/earnings ratio of 5.9.While conceding that the contribution from BarCap, Barclays' investment banking arm, was a bit lower than Nomura had been expecting, 'we view the overall contribution ex own debt/structured credit of £1,669m as still strong in absolute terms and more than sufficient to justify the valuation,' said Nomura analyst Robert Law, adding that Barclays management expects fourth quarter revenue to exceed the third quarter.Nomura does not foresee Barclays issuing any more capital in the foreseeable future and believes it is not seeing the involuntary risk weighted assets growth being experienced by Royal Bank of Scotland.