Barclays share price: Deutsche Bank expects ringfencing to pay off

Deutsche Bank remains bullish on Barclays (LON:BARC), arguing that while ringfencing UK retail customers will be a drain on the bank, this will be outweighed by improving returns. The comments come with British lenders moving to separate their retail divisions from riskier investment banking operations, to comply with new rules designed to prevent a repeat of state-funded bailouts.

Barclays’ share price has been little changed in London this morning, and stood at 190.20p as of 09:55 BST, flat in percentage terms. The stock is slightly underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.28 percent higher at 7,432.44 points. The group’s shares have added just under 10 percent to their value over the past year, but have given up nearly 15 percent in the year-to-date.

Deutsche Bank reaffirmed Barclays as a ‘buy’ yesterday, lifting its price target on the shares from 229p to 231p. Citywire quoted the German bank’s analyst David Lock as saying that he was confident that new US and UK subsidiaries would benefit Barclays, the latter coming in response to the new ringfencing rules in the UK, scheduled to come into force in 2019.

While all subsidiaries will have to be capitalised independently, which is a cost to the bank, Lock argues that this ‘down-streaming’ of money was ‘manageable within the group context’. The analyst further pointed out that the UK subsidiary was the ‘strongest component of the group’ thanks to low [loan] impairments but warned they were ‘likely to rise medium term’.

The comments come after Barclays recently unveiled the board for its investment banking business, with the unit to become the lender’s non-ringfenced operation, responsible for oversight of the Corporate and Investment Bank and International Cards and Payments businesses. 

As of 10:10 BST, Tuesday, 05 September, Barclays share price is 189.80p.