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Brokers are divided over prospects for Barclays in the wake of last week's spectacular gains in its share price, accrued after passing the Financial Services Authority's stress test with flying colours.
The price dropped 17.6p to 156.2 — having trebled since the start of the month — on a combination of profit-taking and downright scepticism on the part of some brokers.
Société Générale downgraded its rating on the bank from hold to sell and cut its target price from 100p to 46p. It warns that despite last week's health check of its balance sheet, Barclays still needs to raise £15 billion-£20 billion to address “excess leverage and strengthen its core Tier 1 capital ratio”. SocGen claims the sale of Barclays' asset-management business iShares will fetch only £3 billion compared with most estimates of £4 billion.
Meanwhile, Keefe Bruyette Woods raised its target from 150p to 170p and repeated its market-perform rating. Only last week, Barclays' own broker, Credit Suisse, rated the shares a buy and jacked up its target from 110p to 170p.
Last year the bank received a cash injection from several Arab investors. This deal precluded it issuing more shares to the Government in order to raise fresh funds. There is mounting speculation that Barclays will also rule out following the lead of rivals Lloyds Banking Group, down 7.4p at 68.7p, and Royal Bank of Scotland, 2.1p cheaper at 24.5p, by joining the Government's toxic-assets protection scheme.
HSBC fell 30½p to 372p, despite KBW raising its rating to outperform while dropping RBS from market perform to underperform. The broker also cut its target for Lloyds from 65p to 62p with an underperform rating, while Standard Chartered, down 32½p at 832½p, is dropped from 1250p to 1080p.
Liberty International, the property developer of retail outlets, fell 42p to 391p. Word is the group is lining up a fundraising at a heavily discounted 250p a share. Like all property companies, Liberty has seen its debt burden rise as property values and its shares fall.
Shares generally highlighted just how fragile confidence remains ahead of this week's G20 conference in London. The late sell-off in New York on Friday was matched by losses in Asia this morning. Worries about the future of US carmakers General Motors and Chrysler have come back to haunt investors The FTSE 100 fell 85.57 to 3813.28.
On AIM, shares of Firestone Diamonds sparkled with a rise of 5p at 22p following positive results from its BK11 project in Botswana. Initial findings indicate the project could contain the equivalent of 830,000 carats. Commercial production could begin from mid-2010.
Rio Tinto fell 123p to 2355p despite reports claiming Australia's Amcor has lined up funding from 15 banks to support its purchase of Rio's Alcan packaging unit.
