UBS cuts Barclays target, raises concerns over returns

12th Feb 2014 10:26

UBS has cut its target price for Barclays from 295p to 280p and retained a 'neutral' rating after reducing forecasts for the banking group following its 2013 results.Analyst John-Paul Crutchley said: "We believe the market was looking for two things from Barclays: a balance sheet restructuring to put capital and leverage ratios beyond reproach; and upgraded cost targets to accelerate the path towards higher returns."He said that while the company "over-delivered" on the former - leverage ratio targets were reached six monthly early - the Investment Banking division is likely to take time to generate returns."The deterioration in the cost:income ratio and the staff comp:revenue ratio at the investment bank is a worrying trend, not least because Barclays appears to be unique in its peer group in this regard. "While the group appears wholly committed to improving returns to shareholders - with revenues essentially market driven, costs apparently driven by a need to protect the franchise and with capital requirements set by the regulatory agenda - the levers available to management to drive higher returns appear somewhat lacking, and hence the risk for potential disappointment."UBS has downgraded its earnings forecasts for 2014, 2015 and 2016 by 4.4%, 2.4% and 2.7%, respectively, to reflect the impact of the deleveraging programme and a "more conservative" progression on the cost:income ratio in Investment Banking.The stock was 0.6% lower at 263.14p by 10:57.BC