Broker snap: Nomura downgrades Barclays on uncertainty

After assessing the 'large uncertain risk' of the LIBOR scandal, Nomura has cut its rating for under-pressure UK banking group Barclays from 'neutral' to 'reduce'.In a research note on Wednesday morning, Nomura attempts to quantify the potential size of the issues surrounding interbank lending rate (London Interbank Offered Rate, or LIBOR) manipulation."Our main thought at this stage is that if this issue is the size of PPI, that would be a positive outcome for the industry. We are concerned that damages around LIBOR misstatement could be material headwinds for the banks that may be affected as part of this investigation. This would be at a time when banks are trying to build capital."With the starting point of products linked to LIBOR and counterparties trading with the banks on the LIBOR panel running into trillions of dollars, even a small slice of this pie could imply substantial losses to the banks that are found guilty".The broker sees material uncertainties at Barclays arising from: the shape and direction of the group under new management given that both the Chief Executive Officer (Bob Diamond) and Chief Operating Officer (Jerry del Missier) have left and the Chairman (Marcus Agius) is to leave in the future; potential losses linked to LIBOR; weak capital market revenue; concerns about the dividend; weak profitability at Barclays Capital.Nomura says he sees the recent sell-off over the last week as "justified" and is struggling to see upside until some or most of these issues are resolved.The broker's target price for Barclays has been reduced from 268p to 210p.By 10:30, shares were trading 0.48% lower at 166.25p.BC