Bank of America just raised its EUR/USD forecast
On Monday, JPMorgan reiterated its Overweight rating and GBP4.00 price target on Barclays Plc (LON:BARC:LN) (NYSE:BCS), maintaining a positive outlook on the financial institution’s shares. According to JPMorgan analysts, Barclays stands as the most undervalued bank in Europe, highlighted by its low price-to-earnings (PE) ratios of 6.4x for 2026 estimates (26E) and 5.6x for 2027 estimates (27E), as well as its price-to-tangible net asset value (PTNAV) of 0.7x for 26E and 0.6x for 27E.
The analyst elaborated that despite Barclays’ shares underperforming in comparison to its European investment banking (IB) peers, the bank continues to receive consensus earnings per share (EPS) upgrades. This dynamic has positioned Barclays as the cheapest bank on a PE basis for the next two years, with an implied cost of equity (CoE) of 15% by 2026E. The underperformance is attributed to negative investor sentiment towards the U.S. market, where Barclays generates approximately 32% of its group revenues through its investment banking and consumer businesses.
JPMorgan’s analysis counters the prevailing negative sentiment, emphasizing the potential for Barclays due to expected high volatility in the investment banking markets, which they view as the most promising growth segment in banking. The current market conditions are seen as an opportunity for upgrades, with the second quarter showing strong momentum. The analyst acknowledged challenges in the U.S. Cards segment, valuing it at just 5x PE due to lower returns of around 8% return on tangible equity (ROTE) for 2027 estimates compared to peers.
Despite the challenges in the U.S. Cards business, which is considered sub-scale and accounts for 8% of the group’s profit before tax (PBT) and consumes 7% of capital for 2026 estimates, JPMorgan sees Barclays as attractively valued. Even if the U.S. Cards business were to be excluded from calculations, the bank would still be favorably valued at 7.0x PE and 0.74x PTNAV for an 11.4% ROTE for 26E, compared to European Banks at 8.5x PE for 26E. JPMorgan suggests that the market’s intense focus on the U.S. Cards segment is excessive, especially considering the V-shape share price recovery of Barclays’ U.S. Card peers.
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