Jonathan Jackson, head of equities at the firm said: "We feel it is prudent to move our recommendation to neutral until there is more clarity over the potential impacts.
The company’s reasoning behind this is that the settlement Barclays has made with US and UK regulators only covers its liabilities in terms of regulatory penalties and still leaves the bank open to civil lawsuits from customers that may have been prejudiced by Libor being set at rates not truly reflective of market conditions.
Barclays acting alone would be unable to significantly influence Libor, Jackson continued, so it is the accusation of collusion with other banks that could result in civil damages claims.
"Several lawsuits have been launched in the US already, and having spoken to industry contacts yesterday, it appears there are other market participants wanting to join class actions suits."
However, as yet it is hard to quantify the probability of damages of the level they could reach, with some estimates in the market as high as £11bn, an amount that would be severely damaging to Barclays’ capital base.
If CEO Bob Diamond is forced to resign over the scandal this would be another headwind for the share price, which is down 16% since the regulators published their settlements with the bank.
Meanwhile, Jackson preferred Lloyds and maintains it as a buy because of its smaller investment banking operation which will give it significantly lower exposure to this issue.
HSBC is also listed as a buy because it is likely to have lower exposure relative to its capital base and less incentive to have manipulated Libor.