Barclays share price: Jefferies turns bearish on bank after Brexit vote

on Jun 28, 2016
Updated: Oct 21, 2019

Analysts at Jefferies have turned bearish on Barclays (LON:BARC) in the wake of the UK referendum which showed that the majority of voters supported Brexit. The FTSE 100 group is among the most impacted by the referendum outcome on account of its exposure to investment and corporate banking.

Barclays’ share price, which posted hefty losses in the previous two sessions, has recovered some ground in early trade, having spiked 6.01 percent to stand at 134.85p as of 08:06 BST, amid ongoing post-referendum market volatility. The group’s shares have lost over 50 percent of their value over the past year, and are down by nearly 40 percent in the year-to-date.
Analysts at Jefferies trimmed their recommendation on Barclays from ‘buy’ to ‘underperform’ yesterday, and slashed their price target on the stock from 287p to 115p. The move came after the UK voted to leave the EU in last week’s referendum, with the outcome pushing financial stocks deep into the red.

“The UK referendum is a game changer for Barclays,” the broker’s analyst Joseph Dickerson commented yesterday, as quoted by Citywire. “The group’s portfolio of businesses, notably the investment banking operations, are overly prone to downside risk on earnings and capital.”
The analyst further added that the ‘Leave’ vote changed “everything about the investment proposition for Barclays’ equity,” with the group’s management already having “a full plate”. The referendum came at a sensitive time for the lender which is currently undergoing a restructuring under its new chief executive Jes Staley.
“A post-referendum world makes management’s job even harder,” Dickerson pointed out, noting that “the structure, profitability and indeed existence of Barclays’ investment bank are called into question”.
Bloomberg meanwhile noted that the problem for the UK group’s investment bank stemmed from the potential loss of ‘passporting’ rules for London’s banks, which allow them to operate across the region without having to set up local subsidiaries.
“The complexities of managing an exit from the EU alongside the introduction of ringfencing makes its investment bank operations potentially even more problematic than before,” BofA analyst Michael Helsby wrote, as quoted by the newswire.
As of 08:22 BST, Tuesday, 28 June, Barclays share price is 138.65p.