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Some City brokers still have issues about Barclays and the apparent ease with which it has escaped the fallout from the banking meltdown which engulfed its rivals.
Morgan Stanley is not one of them. It has been telling clients today that Barclays is a surefire winner in the sector and has been busily singing the lender's praises.
This is because it has resumed coverage of the shares with an overweight rating and a 420p target. The Barclays share prices was showing signs of having run too far, too soon, falling 6.5p to 352.1p. If the broker is correct, that means there is still plenty of scope for improvement in the weeks ahead.
The American broking house claims that Barclays has better-quality assets than those of its peers and that legacy issues at the group are abating. “The company is positioning itself as a winner as the European and US banking markets consolidate,” it says.
Barclays' Houdini act has certainly left its critics gasping. The bank refused to join the Government's Asset Protection Scheme, complaining it was too expensive. It also resisted the temptation to tap shareholders to bail it out, and instead turned to sovereign wealth funds in order to raise £7 billion. It has made big write-offs relating to bad debts but now claims the worst is over. The shares have risen sevenfold since their low point at the start of the year.
Meanwhile, MS has upped its target price for state-controlled Lloyds Banking Group, down 6.4p at 91.5p, from 65p to 80p despite mounting speculation that it now wants to stay out of the Asset Protection Scheme and will, instead, turn to shareholders for around £16 billion by way of a rights issue. It rates the shares underweight.
Rival Credit Suisse has tweaked its target on Lloyds from 50p to 55p, while JPMorgan raisied its sights from a lowly 14p to 40p with an underweight rating.
Those losses among the banks took the steam out of an early mark-up. Sentiment was also undermined by a widening trade gap between the UK and the rest of the world. During May it ballooned from £6.17 billion to a worse-than-expected £6.45 billion due to the oil balance swinging into deficit because of summer maintenance. The FTSE 100 index fell 12.8 to 4709.3 in another day of thin trading. Miners saw early gains pared. Randgold Resources fell 9p to 3505p, after touching 3577p. Rio Tinto traded 5p firmer at 2348½p despite the Chinese government continuing to ratchet up the allegations of spying. Anglo American dropped 17p at 1881p, after 1932p, while BHP Billiton clung to a rise of 2p at 1552p, after 1590p.
Admiral Group fell 11p to 1000p after Credit Suisse cut the insurer from outperform to neutral. InterContinental Hotels lost 20½p at 737½p after reporting a near-40% drop in profits, but maintaining the payout to shareholders. Brokers said the results were ahead of expectations.
Friends Provident firmed 0.6p to 75.9p after agreeing the revised terms from Resolution, down 2.12p at 85p. But Prudential was a nervous market, losing 11.6p at 475.3p ahead of Thursday's half-year results, while Aviva, which cut its payout to shareholders last week, fell 17¾p to 363½p.
Venture Production shaded 2p to 838p with the deadline for Centrica's bid worth 845p a share (£1.3 billion) due to expire anyday. Centrica, 0.1p firmer at 222.2p, has already said it will not increase the terms.
Salamander Energy slipped 2¼p to 206½p while its partner Serica Energy rose 3¾p to 62½p. They operate the Kambuna-4 field, offshore of Sumatra, Indonesia, where sales have started. The move provides Serica with its first significant production revenue.
Gas is being introduced to the pipeline system for transportation to the Belawan power plant. Production is expected to build to a plateau of 40 million standard cubic feet per day of dry gas and approximately 4000 barrels of condensate per day. On completion of the upgrade and refurbishment of the Pertamina liquid petroleum gas plant at Pangkalan Brandan, up to an additional 10% of gas will be produced so that LPG can be extracted from the gas stream.
Oriel Securities has repeated its buy rating on Salamander and Serica with Salamander targeted at 208p a share and Serica at 59p. Serica's joint broker Tristone Capital has a 115p target for Serica and 220p for Salamander.
Afren, unmoved on 58p, and its partner Oriental Energy Resources have secured a drilling rig for the development of the Ebok field offshore of south-eastern Nigeria. The Ebok is forecast to produce 35,000 barrels by the end of 2010.
