Goldman Sachs, fresh from reporting a 22% rise in profits, has turned its attention to doing some damage to its rivals, notably Barclays.
Goldman analysts have downgraded Barclays from neutral to sell and added it to their conviction sell list, with a three month price target of 482p.
They say: " As we head into the first half of 2008, we believe Barclays will continue to suffer as the current credit concerns widen into other asset classes outside subprime. We see two impacts from this: first, estimates remain too high, and second, returns are forecast to fall as Barclays is unlikely to be able to utilise its capital as efficiently as before.
"We expect negative headlines on write-downs and underlying earnings trends across the sector to continue to weigh on Barclays and cause the market to reassess earnings expectations for Barclays Capital.
"Over the last three years, 85% of the increase in Barclays pre-tax profit has come from three sources: BarCap, Barclays Global Investors and the purchase of Absa. In 2008, we forecast a 20% decline in profits at Barclays Capital and flat profits for the group as a whole.
"We struggle to believe that Barclays can fully offset such a decline in capital markets profitability. As a result, we forecast flat earnings for the group as a whole, helped by the rest of the group growing 9%."
Barclays fell 6.5p to 502.5p.
Goldman also removed HBOS from its buy list, but this has not had such an effect. HBOS is 3.5p higher at 739.5p at the moment.
