RBC Capital Markets thinks Barclays is trading at a “good entry point” that investors should take advantage of. Analyst Benjamin Toms upgraded shares of the British bank to outperform from sector perform, saying in a Friday note that its valuation gap relative to the sector has “widened” despite Barclays’ stronger performance relative to peers. BCS YTD mountain Shares in 2023 “Our calculations suggest that BARC will be the biggest beneficiary of a structural hedge tailwind, the magnitude and duration of which, we think, are underappreciated by the market,” he wrote. “We see the bank’s current valuation as a good entry point.” U.S.-listed shares of Barclays have dipped about 1.5% this year, falling 4.8% alone since the start of May. Toms lifted his price target on U.K.-based shares to 230 pence, or £2.30, from 215 pence, or £2.15. The price hike implies around 50% upside from Thursday’s close. RBC views the market as underappreciating the benefits that structural hedging poses to U.K. banks. Barclays is poised to see the largest tailwinds given its size and larger spread between the yield of swaps rolling on and off the hedge. By 2025, this benefit should boost net interest income by 30% and 55% by 2027 from 2022, he forecasts. Along with its enticing valuation, Toms expects continued outperformance from Barclays on trading revenues and investment banking fees, adding that British bank should utilize Credit Suisse’s recent collapse to its advantage. The bank’s wealth and private banking segment is also likely undervalued, he added. — CNBC’s Michael Bloom contributed reporting
