Barclays share price analysis amid the trading and investment banking boom
Barclays share price has been in a strong bull run and is now hovering at its highest level on record. It has jumped in the last five consecutive months, and is up by 683% from its lowest level during the pandemic, bringing its market cap to over £67 billion. So, what’s next for the overbought BARC stock?
Barclays stock to benefit from trading and deal-making
Barclays shares have been in the spotlight this year as investors reacted to a statement by Donald Trump on capping interest rates on credit cards to 10%.
He made that statement as he started to focus on the affordability issue ahead of the mid-term elections. Analysts believe that banks will ultimately sue the administration, as there is no law that mandates such a cap. Barclays runs a big credit card company in the US and would be impacted by that cap.
Barclays share price is also in the spotlight amid the trading and deal-making boom, especially in the United States. Top companies like Goldman Sachs and Morgan Stanley published strong financial results.
Data shows that the top five American banks reported a record $134 billion in trading revenue last year, helped by Donald Trump’s volatility. Its revenue rose by 15% last year, the biggest increase in five years.
At the same time, these companies published strong investment banking revenues with a backlog since 2021 when deal-making surged. These benefited from the soaring demand for equity and debt and equity underwriting.
Therefore, analysts believe that Barclays will also publish strong numbers as it is one of the biggest players in the investment banking and trading industries globally.
The most recent results showed that the company’s investment banking business continued doing well.
For example, its investment bank made over £3.1 billion in income, up from £2.9 billion in the same period a year earlier. Its statutory Return on Tangible Equity (RoTE) rose to 10.1% from the previous 8.8%.
The company also boosted its forward guidance for the year and unveiled a large £500 million share buyback. It also announced that it would start paying a quarterly dividend as part of its £10 billion to shareholders.
Barclays share price, like Lloyds, has also jumped as traders believe that its motor insurance crisis is ending. It booked £235 million charge for motor finance to compensate customers. It had set aside £90 million for this compensation.
Additionally, Barclays stock did well after Chancellor Rachel Reeves budget speech. She decided not to introduce windfall taxes as some analysts were expecting.
Barclays share price technical analysis
BARC stock chart | Source: TradingView
The weekly chart shows that the BARC stock price has been in a strong bull run in the past few years. It has rallied to 484p from a low of 116p in 2022 and 2023.
The risk, however, is that the stock’s Relative Strength Index (RSI) has moved into the extreme overbought level of 77. At the same time, the stock has remained much higher than the 50-week and 100-week Exponential Moving Averages (EMA).
This means that the stock could go through mean reversion this year. Mean reversion is a situation where an asset moves back to its historical averages.
The next key catalyst for the stock will be on February 10 when the company publishes its financial results.
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