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RBS say Barclays has insufficient capital and may need to raise a further £7.5 billion
RBS analysts Ian Smillie and Cormac Leech said today that Barclays Bank may need to raise between £4.9 billion and £7.5 billion to bring its capital ratio in line with its peers, and have changed their advice to "sell" from "hold".
They said:"The two principal drivers of our sell recommendation on Barclays depend on a continuation of the investment banking industry trend towards tougher capital ratios, and ongoing declines in debt market prices."
Barclays has a higher level of balance-sheet gearing than peers, an uncomfortable position in the current environment of financial system de-leveraging and heightened external scrutiny of banks' balance sheets.
Barclays, last month reported a 33% drop in first-half profits after taking a £2 billion writedown on the value of risky assets, and said challenging market conditions are likely to last through 2009.
On the plus side the analysts said Barclays offers the most attractive long term investment case of any domestic UK bank.
"We believe Barclays strategy is clear and consistent, and has been successfully executed by the current management team," they added.
They said:"The two principal drivers of our sell recommendation on Barclays depend on a continuation of the investment banking industry trend towards tougher capital ratios, and ongoing declines in debt market prices."
Barclays has a higher level of balance-sheet gearing than peers, an uncomfortable position in the current environment of financial system de-leveraging and heightened external scrutiny of banks' balance sheets.
Barclays, last month reported a 33% drop in first-half profits after taking a £2 billion writedown on the value of risky assets, and said challenging market conditions are likely to last through 2009.
On the plus side the analysts said Barclays offers the most attractive long term investment case of any domestic UK bank.
"We believe Barclays strategy is clear and consistent, and has been successfully executed by the current management team," they added.
Wed, 3rd Sep 2008