Barclays (BARC) rebounds on Wednesday on higher-than-expected inflation figures. In particular, this morning saw the UK consumer price index rise by more than 4%, the highest level recorded in a decade. This latest figure will exert more pressure on the Bank of England to raise the base rate in December to cap inflation.
Apart from the changing economic landscape, Barclays itself is undergoing some drastic management changes. The CEO of the group James Staley resigned earlier this month; new CEO CS Venkatakrishnan is reshaping the top leadership roles. Despite these management changes, the market assumes that Barclays’ banking model will not be severely disrupted for now.
Barclays’ third quarter profits more than doubled to £1.45 billion as investment banking fees surged to £971 million.
But if we cast our view over a longer horizon, some challenger banks may disrupt the Big Four. Starling Bank, for example, predicted this week that its fast-growing SME business accounts will overtake that of Barclays’ within five years.
At the time of writing, Barclays’ share trades at 196.5p.
Barclays’ (BARC) share price extends its rebound into the vicinity of the 200p area.
From its daily chart, it is clear that technical support has been reaffirmed at 190p. This was the peak established in the spring of 2021.
What’s next for Barclays? Trendwise, the banking giant remains on a bull trend, with the pattern of higher highs and higher lows firmly established. The next target is at the 220p resistance.
But don’t forget that Barclays’ share price is now 150 percent higher from its pandemic lows. A choppier period may lie ahead should inflation continue to spike which will cause some economic turbulence.
Barclays banking model is seen to be less volatile than before the Global Financial Crisis. According to its latest July presentation, 34 percent of its income derives from interest income while 66 percent from fees.
Moreover, credit impairment this year has been lower than expected. This led to two share buybacks from the bank this year. The first was announced in February and completed in April (£500 million). The second buyback was announced in August and is still ongoing (see, e.g., the latest RNS on this programme). The amount for the second tranche is set at £700 million. On top of this, the bank is paying dividends.
As such, the broker community is fairly bullish about the stock. According to the Financial Times, out of a panel of 23 analysts, 18 are recommending the stock as a ‘Buy’ or ‘Outperform’. This is a far more bullish consensus than that recorded a year ago. The highest share price target is at 315p, which is more than 50% higher than the current price level.
Therefore, one can expect Barclays’ stock to remain fairly buoyant for the time being.