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(Sharecast News) - Barclays shares slid on Monday after US President Donald Trump called for a one-year 10% cap on credit card interest rates.
Trump announced the plans on Friday, saying they could save Americans tens of billions of dollars.
The cap would apply from 20 January 20. Trump pledged to "no longer let the American public be 'ripped off' by credit card companies".
At 1025 GMT, Barclays shares were down 3.4% at 468.50p.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, pointed out that a 10% ceiling on credit card rates is roughly half today's average interest rate and said this would upend the basic economics of the industry, forcing lenders to rethink how they manage risk and who they're willing to lend to.
"Most banks would respond by cutting credit limits, closing riskier accounts, and scaling back rewards programmes, because they simply couldn't cover losses at that price point," he said. "Cardfocused names in the US would be hit the hardest, but big universal banks with card divisions would also feel the squeeze.
"Barclays is taking the biggest hit among the UK majors this morning, sliding more than 3% as investors react to the prospect of tighter creditcard economics. The bank's US cards operation, ranked ninth in the market and contributing around 11% of group profits, leaves it more exposed to any push for rate caps than most of its UK peers.
"Barclays is less exposed than some, given it targets higher-quality borrowers, which naturally have lower rates. However, this hasn't shielded it from becoming the UK's focal point for traders looking to express caution across the wider banking sector today."
Britzman added that if lenders pull back, alternative options like Buy Now, Pay Later would likely pick up the slack, "giving a boost to players such as Affirm and Klarna, which are already seeing strong demand".
Russ Mould, investment director at AJ Bell, noted that Barclays entered the US credit card market in 2004 with the acquisition of Juniper Financial and said it is now one of the largest issuers in the country via partnership brands.
"While consumers would love to see lower rates on credit cards, Trump may not be able to enact such a move without approval from Congress," he said. "It also raises questions about the knock-on effect of a cap on credit and whether a drop in associated earnings for lenders could lead to reduced availability of credit in general, forcing some consumers and businesses to seek more costly alternatives."