Barclays share price rallies after PPI provisions update

Barclays share price rallies after PPI provisions update
Written by:
Tsveta van Son
10th September 2019
Updated: 11th March 2020

Barclays’ (LON:BARC) share price has surged in London this morning, with investors reacting positively to the company’s update on its provisions related to the payment protection insurance (PPI) scandal. The update comes after peers Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) lifted their respective provisions for PPI claims.

As of 09:10 BST, Barclays’ share price had added 3.30 percent to 145.62p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.23 percent in the red at 7,219.34 points. The group’s shares have given up some 17 percent of their value over the past year, as compared with less than a one-percent fall in the Footsie.

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Higher PPI provisions

Barclays said in a statement yesterday that in line with the wider industry experience, it had also seen a significantly higher than expected volume of PPI-related claims, enquiries and information requests last month, including a spike in the last days of August ahead of the regulatory deadline on claims.

As a result, the FTSE 100 group expects to  increase its provision for PPI redress in its third-quarter provision by between £1.2 billion and £1.6 billion.

“The final outcome could be above or below the estimated range and will depend on a number of factors including the quality of recently submitted claims,” the lender cautiouned in the statement.

The company noted that at this level of provisioning, it expects that it will be at its target CET1 ratio of about 13 percent at year-end.

Analysts on Barclays

Goldman Sachs, which rates the FTSE 100 group as a ‘neutral,’ set a target of 190p on the Barclays share price, while Shore Capital reaffirmed the company as a ‘buy,’ without specifying a valuation on the stock. According to MarketBeat, the blue-chip group currently boasts a consensus ‘buy’ rating and an average price target of 206.07p.

Barclays is scheduled to update the market on its third-quarter performance on October 25.

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