Broker tips: Barclays, LSE, Standard Chartered

(ShareCast News) - Deutsche Bank downgraded Barclays to 'hold' from 'buy' and cut its price target to 180p from 255p, saying the stock was more now more of an investment case for 2017-18 rather than 2016.It said that Barclays' strategic update, whilst necessary to strengthen the capital position and simplify the group, has reset the clock."We think the acceleration of noncore reduction, with accompanying actions on the dividend make strategic sense, and should drive group return on tangible equity closer to core RoTE," DB said.However, it said the reality is that following the fourth quarter results and the sale of the Africa business, both group and core earnings per share are lower than previously forecast - now 21.5p and 23.6p respectively for 2018 - while better news on capital will likely be back-loaded into 2017/18.DB noted that Barclays now intends to pay a dividend of 3p for this year and the next, paid semi-annually from 2016 rather than quarterly.Deutsche estimates around 8% dilution to core earnings from the sell-down of Barclays Africa.In addition, it said a more challenging Investment Banking environment, including potentially higher impairment charges than cyclically low-2015 levels, is likely to weigh against continued growth in Barclaycard, Personal and Corporate Banking."This is despite Barclays IB's relative bias to Macro which should hold it in better stead versus peers, and our expectation that costs will continue to fall in the core."The German bank said was Barclays is inexpensive at 0.6x tangible NAV, but trades at 7.7x 2018 group EPS, and has limited near-term dividend support. Credit Suisse upped its target on London Stock Exchange to 3,350p from 2,900p to reflect the value of cost synergies accruing to LSE shareholders from the proposed merger with Deutsche Boerse on its estimates.The bank retained its 'outperform' rating on the stock, pointing to the potential for further upside to the target price in the event of a superior counterbid."The proposed merger between LSE and DB1 and a subsequent announcement from ICE that it is considering a counterbid for LSE serve as timely reminders of the strategic logic of exchange consolidation," it said.CS said what makes LSE particularly appealing is that its majority-owned clearing house, LCH Clearnet, has a key role in determining the long-term winner in European futures markets."For this reason, the owners of Europe's two largest futures exchanges (DB1/ICE) could battle for control."The bank said that with LSE shares trading at a 10% premium to the Deutsche Boerse merger terms, market participants have high expectations of a better counterbid.CS reckons Deutsche Boerse can up its game by including a cash sweetener but said this would rule out a nil premium all share merger-of-equals and assumes the ratings agencies will relax a gross leverage ceiling of 1.5x which currently applies to DB1 at a group level.The bank said that if a bidding war materialises, this may lead to a re-appraisal of strategic options for other European market infrastructure providers and further consolidation is a possibility."Our preferred way to play this is via ICAP which we believe is most significantly undervalued in a takeout scenario. While DB1 could become a target itself, domestic government opposition to a takeover remains a significant hurdle in our view." Moody's downgraded its rating on Standard Chartered's long-term debt on expectations the lenders' profitability would remain weak over the next two years and the more "challenging environment" in some of the markets in which it operates.The ratings agency said: "the group is implementing a number of initiatives to reduce its credit risk and restore its profitability, including a reduction in risky exposures and a downsizing of its operations in some of its less profitable markets."However, Moody's expects profitability to remain weak for at least two years, and the operating environment in some of the markets in which Standard Chartered operates has become more challenging."StanChart's senior unsecured debt rating was lowered by one notch from Aa2 to Aa3, with a 'negative' outlook, although the ratings on the bank's short-term deposits and debt was unchanged at P-1.Asia-focused StanChart's asset quality and profitability had deteriorated "significantly" in 2015, due to its exposure to commodities and India, Moody's explained.That had led to an increase in its problem loan ratio from 2.7% at the end of 2015 to 4.8% at the end of 2015.