Barclays is among the biggest losers, as the market continues its decline despite better signs from Europe on bank lending.
In an otherwise upbeat presentation on overseas retail growth, Barclays warned of a slowdown in its investment banking business, leading to analysts to trim their earnings forecasts. Analysts at RBS kept their buy rating on the rival bank, but cut their price target from 420p to 410p. They said:
Future expectations for global retail banking were overshadowed by comments on the group's second quarter performance, particularly for revenue in Barclays Capital, which missed market expectations for the fourth quarter in a row. We believe this is a cyclical low. We lower our underlying second quarter revenue forecast from £4bn to £3.1bn (-23%), and assume quarterly revenue growth remains stagnant for remainder of 2010. Although we continue to expect top-line growth going forward, this leads us to lower underlying 2011 and 2012 revenue to £15bn and £17bn respectively.
We raise our impairment charge assumptions by £0.6bn in 2010 and £0.8bn in 2011 to reflect the ongoing weak performance in Spain. We lower earnings per share by 26% in 2010 and 11% in 2011.
Keeping its neutral rating Goldman Sachs said:
The capital markets day reinforced our preference for Lloyds Banking Group over Barclays. Within global retail banking, Barclays expects to: (1) make some small bolt-on acquisitions; (2) take market share; and (3) grow its loan book, but only expects top-line growth of mid-single digits. Lloyds: (1) has not stated it will make acquisitions; (2) plans to keep or even lose some market share; and (3) plans to shrink its book, yet targets high single-digit growth (for the whole group).
Overall the FTSE 100 is now down 43.89 points at 4872.98, albeit in thin volumes once more. The mood was nervy from the start, after ratings agency Moody's last night put Spain's AAA sovereign rating on review for "possible downgrade".
Then came news of a slight slowdown in Chinese manufacturing in June, renewing concerns about where global economic growth is going to come from. With Europe's austerity measures bound to hit growth, China was expected to take up the slack. The worry is this will not happen.
Still there have been more encouraging signs since, with Spain managing to get a €3.5bn bond issue away successfully this morning, albeit it was 1.7 time subscribed as opposed to the 2.35 time seen at the last such issuance in May.
Meanwhile the ECB announced it had lent 78 European banks €111.2bn in six day funds. This was pretty much in line with expectations, and comes as a number of banks pay back €442bn of loans they took out at cheap rates a year ago.
Later today come US housing figures and weekly claimant count numbers, ahead of tomorrow's non-farm payrolls.
