The Barclays (LON: LON:BARC) share price has done well this year, making it one of the best-performers in the FTSE 100 index. It has risen by over 81% from its lowest point in 2023 and is nearing the year-to-date high of $225.
Barclays turnaround is continuing
Barclays, one of the biggest British banks, is implementing a turnaround after years of underperformance. On Thursday, the company announced that it was selling its German consumer finance division to BAWAG for a small premium to net assets.
The German division is relatively small part of the company’s business with over £4.7 billion in gross assets. This sale will help Barclays deepen its focus on its core markets, where it is seeking to grow its market share. It also sold its US credit card debt to Blackstone (NYSE:BX).
For example, earlier this year, Barclays acquired Tesco (LON:TSCO) Bank in a deal valued at over £400 million as it seeks to grow its share in the UK. In 2023, the company acquired Kensington Mortgages.
Investors are appreciating these actions, which explains why the stock has jumped sharply this year. It has become the second-best-performing banks in the FTSE 100 index after NatWest (LON:NWG).
To be clear: other British banks have also done well this year. LLoyds Bank has soared by about 40% this year while HSBC (LON:HSBA) has risen by almost 30% from its lowest point in December last year. Other European banks like Deutsche Bank (ETR:DBKGn), UniCredit (LON:0RLS), and BNP Paribas (EPA:BNPP) have also rallied.
In Barclays case, there are signs that the investment banking division is crawling back as deal making increases. Data compiled by WSJ shows that M&A deals have risen by 16% globally to over $1.57 trillion. In Europe, these deals have risen by 35% while in the US, they have risen by 29% to $771 billion.
Initial Public Offerings (IPO) are also recovering albeit at a slow pace. Globally, companies have raised $322 billion this year, a 10% increase from the same period in 2023.
These numbers are important for Barclays because it is one of the biggest investment banks in the industry. It is the 7th biggest Equity Capital Markets (ECM) bookrunner this year and the 7th biggest M&A advisor.
Interest rate cuts and UK elections
The Barclays share price has also soared as investors wait for the results of today’s election in the UK. Unless something happens, data shows that the Tories will lose big and hand the country to the Labour Party.
It is unclear whether the Labour victory will have a major impact on Barclays and other banks. One area it could impact them is on interest rates, which could rise in the financial services industry.
The other important catalyst for the Barclays share price will be interest rate cuts by the Bank of England (BoE). Analysts expect that these cuts will start in July since the UK inflation has dropped to its target.
Barclays, like other banks, has benefited from higher interest rates, which have pushed it to boost returns to investors. Its goal is to distribute £10 billion to shareholders in the next two years. That is a significant figure because it has a market cap of over £32 billion.
The next catalyst for the BARC stock price will be next week’s US bank earnings and its results, which will come out on on August 1st.
Barclays share price forecast
BARC chart by TradingView
The daily chart shows that the BARC stock price has continued rising in the past few months. It has soared from a low of 122p in March last year to over 220p today. It is also approaching the important resistance point at 225p.
The stock has remained above the 50-day and 100-day moving averages. Other oscillators have also pointed upwards. Therefore, the stock will likely continue doing well, with the next point to watch being at 225p. The risk is that it could form a double-top pattern at 225p, which is one of the most bearish signs.
This article first appeared on Invezz.com
