Sept 3 (Reuters) - RBS downgraded Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) to "sell" from "hold," saying that the bank may need to raise between 4.9 billion pounds and 7.5 billion pounds to bring its capital ratio in line with its peers.
"The two principal drivers of our sell recommendation on Barclays depend on a continuation of the investment banking industry trend towards tougher capital ratios, and ongoing declines in debt market prices," analysts Ian Smillie and Cormac Leech said.
Barclays has a higher level of balance-sheet gearing than peers, an uncomfortable position in the current environment of financial system de-leveraging and heightened external scrutiny of banks' balance sheets, Smillie and Cormac said.
Last month, Barclays reported a 33 percent drop in first-half profits after taking a 2 billion pound writedown on the value of risky assets, and said challenging market conditions are likely to last through 2009.
The analysts, however, said Barclays offers the most attractive long term investment case of any domestic UK bank.
"We believe Barclays strategy is clear and consistent, and has been successfully executed by the current management team," they added.
The analysts cut their price target on the stock to 300 pence from 475 pence. Shares of the company were trading down nearly 3 percent at 354.25 pounds at 0750 GMT. (Reporting by Tenzin Pema in Bangalore; Editing by Jarshad Kakkrakandy)
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