The Barclays share price has been recovering steadily over the last year, hitting its highest levels since late 2019. This positive movement comes on the back of rising optimism over the health of the UK economy, as lockdown measures are gradually loosened, as well as the outperformance of US investment banks and their recent strong numbers.
As the bank gets set to release its Q1 results, what will the latest figures mean for the Barclays share price?
Barclays share price reverses Covid-19 declines
Earlier this month the bank reversed all its post-pandemic share price declines, returning to levels last seen in late 2019, before the Barclays share price was hit hard by the sell-off as Covid-19 made its rapid spread across the world.
The Barclays share price sat at 179p before February 2020’s dip, and after a steady recovery have now surpassed that figure to reach just below 190p.
Investment banking division helps profitability
As one of the few UK banks with an investment banking division, the failure of activist shareholder, Ed Bramson, to force the slimming down of the business has resulted in a much better outcome for the bank, given the recent increases in volatility and steepening of the yield curve. CEO Jes Staley has long been under pressure to scale back Barclays’ investment arm, but his resistance seems to still be paying off.
This hasn’t stopped Bramson from continuing to bang that drum, however he’s on much shakier ground by suggesting the bank goes down the Deutsche Bank route, given the litany of problems there. Whatever his views about trading businesses in general, managed correctly they have helped the larger banks operate a diverse business model, as well as increase profitability.
This was reflected in its last set of numbers, when Barclays reinstated the dividend with a 1p payout as well as a £700m share buyback, despite setting aside over £4.8bn in non-performing loans. Pre-tax profit for 2020 fell to £3.1bn from £4.4bn, while investment bank profit rose to £4bn. Investors will be hoping that the investment banking division keeps up its performance, and that it continues to keep the Barclays share price rising.
Reopening to boost Barclays' share price further?
Staley was also bullish about 2021, citing the prospects for the economic reopening. With the government’s roadmap to a full reopening seemingly progressing as planned, things could get better for Barclays’ share price. On 12 April, pubs and non-essential shops were allowed to reopen (with social distancing measures in place) which could stimulate spending in the UK over the summer.
Prospects may also be helped by the IMF upgrading its forecast for the UK economy, predicting far better levels of activity in 2022, with growth of 5.3% this year and 5.1% in 2022.
Barring a setback in the form of a new variant or another lockdown, the outlook looks much brighter now than at the beginning of the year. With this in mind, Barclays might be inclined, like Lloyds Banking Group earlier this week, to release back some of last year's loan loss reserves and thus boost its profits that way.
Barclays releases its Q1 numbers on Friday 30 April at 7am. What will this mean for the Barclays share price?
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.