The Barclays share price has been slowly but surely sliding for the past two years. The bank, like many others in the sector including Lloyds, HSBC, Standard Chartered and Royal Bank of Scotland (RBS), has no shortage of challenges to overcome, and traders will be looking to this week’s half-year results to get a reading on whether it’s coping with the pressure.
The Barclays share price has declined 25% over the past two years, and 16% in the last 12 months – not surprising when you consider what the FTSE 100 bank has been contending with during that time. Residual reverberations from the financial crisis, Brexit looming, low interest rates, a worldwide economic slowdown and tightening regulations have all played their part in exerting downward pressure on the Barclays share price. And in February, Tiger Global, one of the bank’s major shareholders at the time, sold its $1bn stake in the bank, in what could hardly be called a resounding vote of confidence in the direction of the bank.
What can we learn from Barclays’ Q1 results?
Barclays’ numbers in Q1 pointed to a difficult quarter, with profits before tax coming in at £1.5bn, down from the same period a year ago. At the time, the company said it was looking to cut costs further in light of the difficult trading environment, which suggests that management weren’t particularly confident in the outlook.
On the plus side, the group’s investment banking division had a better quarter, with an increase in total income to £2.5bn, driven by a big improvement in FICC, which saw revenues rise to £902m in Q1, from £570m in Q4. This helped spike the guns of activist investor Edward Bramson, who has been pushing for a seat on the board and encouraging management to spin off the investment banking division. Despite the positive results from the investment banking arm, the Barclays share price continued to disappoint following the Q1 results.
Barclays share price: Edward Bramson’s impact
The British-born activist investor has built up a 5.5% stake in Barclays through his investment vehicle Sherborne Investors, putting him in third place behind BlackRock and Qatar’s sovereign wealth fund in terms of the size of his stake in the bank. Bramson’s attempt at the AGM on 2 May this year to get shareholders to back his bid to join the board was thwarted when only 12.8% of votes supported his plan.
While Mr Bramson lost his fight for a seat on the board, he is unlikely to give up on his wish for management to axe investment banking. However, making changes to that part of the business won’t alter the fact that Barclays’ overall performance in Q1 was disappointing across other areas. Another poor performance in Q2 will inevitably lead to speculation as to whether CEO Jes Staley’s plan for moving the bank forward is still fit for purpose, and could cause the Barclays share price to slide further.
Brexit and the CMA weigh on Barclays share price
The Brexit backdrop still looms large, not only for Barclays, but for the wider UK banking sector and economy as a whole. And with Boris Johnson as the UK’s new prime minister, the threat of a no-deal Brexit seems to have increased again, which could hit the Barclay’s share price hard given its exposure to the UK economy.
Barclays has also been directed by the UK Competition and Markets Authority (CMA) to reimburse around 800 small business clients and improve its practices. The move came after Barclays prevented small and medium-sized businesses with premium accounts from moving their funds to or from accounts with other banks. Barclays also told notice deposit account holders that they must open Barclays current accounts. The CMA has said that the bank has now taken action to resolve the problems.
Keep an eye on the impact on the Barclays share price when the bank’s half-year results come out at 7am on Thursday 1 August.
Read our Barclays share price half-year results round-up.