Investors are underestimating the potential profitability of Barclays' securities unit as the firm cuts costs and is able to reinvest capital, according to Morgan Stanley research.
Bloomberg reports that Barclays has the potential to take market share from competitors such as UBS and Royal Bank of Scotland as they retreat from fixed income, currencies and commodities trading, said analyst Chris Manners in a note to clients.
Cost-cutting at the investment bank is also 'not well understood' by the market, the Morgan Stanley analyst said.
'The market does not fully appreciate the potential for Barclays’s investment bank to generate attractive returns', Manners, who has an overweight rating on the stock, said in the note. 'We expect Barclays to meet regulatory thresholds without raising fresh equity and note that $14bn of capital is tied up in FICC legacy assets', which could be reinvested in profitable business, he said.
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