Citi Downgrades Barclays to Neutral Due to Valuation Concerns

Citi downgraded Barclays to Neutral from Buy with a price target of 366 GBp, citing valuation following the recent run in the shares. Citi expects European wholesale banks to report slower trading revenue growth compared to US banks.

Citi has downgraded Barclays PLC (BCS, Financial) from a "Buy" to a "Neutral" rating, adjusting its price target from 360 GBp to 366 GBp. This decision is primarily attributed to valuation considerations following a recent uptick in the stock's performance [1]. Despite a slight increase in the price target, the downgrade reflects Citi's expectation that European wholesale banks, including Barclays, may experience slower trading revenue growth compared to their U.S. counterparts [1].

The downgrade comes as Citi forecasts Barclays’ second-quarter 2025 adjusted profit before tax at £2.3 billion, approximately 1% below consensus estimates. The bank expects in-line revenues, 2% lower costs, and 14% higher impairments, primarily driven by the U.S. consumer division [2]. By division, Citi projects above-consensus performance for Barclays’ Investment Bank (3% higher), broadly in-line results for the UK operations, but significantly weaker performance in U.S. Consumer, where projections are 44% below consensus [2].

Citi anticipates a CET1 ratio of 13.6%, representing a 30 basis point quarterly decline and 40 basis points below consensus, attributed to an assumed full deduction for the newly announced £1 billion share buyback program [2]. The research firm also expects a quarterly dividend of 3.2 pence per share, in line with market expectations [2].

Following recent share price appreciation, Citi believes the risk-reward profile for Barclays is now more balanced and sees limited near-term catalysts for further stock re-rating, prompting the downgrade despite the slight price target increase [2].

References:
[1] https://www.gurufocus.com/news/2986877/citi-downgrades-barclays-bcs-to-neutral-adjusts-price-target-bcs-stock-news
[2] https://www.investing.com/news/analyst-ratings/citi-downgrades-barclays-stock-to-neutral-on-balanced-riskreward-outlook-93CH-4141114