Barclays PLC Slips Deeper Into Buy Territory

The Barclays PLC (LON: BARC) share price slide continues. This opportunity is too good to miss, says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Barclays Is Down Nearly 25% This Year

Three weeks ago, I suggested that recent price falls made Barclays (LSE: BARC) (NYSE: BCS.US) a buy again. At the time, it traded at 253p, down from 300p in January. It has since fallen another 8% to 232p. So I’m back, with an updated message: Barclays is down almost 25% since the start of the year, pushing it even deeper into buy territory.

barclaysRight now, there is a tension at the very heart of Barclays, and that is causing share price palpitations. The fault line is between its retail and investment banking decisions. Chief executive Antony Jenkins has rightly identified that its retail arm urgently needs to rebuilt customer trust, a process he admits will take the best part of the decade. 

That’s partly the thinking behind the £1.2 billion Project Transform. But values such as “respect” and “integrity” don’t fit easily with the crazy world of investment banking.

Someone Is Making Money From Barclays

Jenkins knows that if he wants to compete with the big US and Asian banks, he has to keep its investment bankers sweet. He recently announced a controversial 10% increase in its bonus pot to £2.4 billion, despite a 32% drop in underlying profits to £5.2 billion. Twelve executives pocketed £32 million in shares, to predictable headlines. 

Giving the conflicting goals of the two divisions, Barclays remains prone to lurch from one crisis to the next. Its public image crisis will continue, as it looks to cut costs by laying off 12,000 lower-paid staff. 

There has even been talk that Barclays will spin off its investment banking operation. Jenkins has to make his mind up: does he want respect and integrity, or does he want a flourishing investment bank? He can’t have both, it seems.

Barclays The Transformer

Yet I still think there are strong reasons to invest in Barclays, especially at this price. Project Transform isn’t just about giving Barclays a shiny makeover. The bank is also looking to slash costs by cutting staff, closing branches and moving into mobile banking.

Regulation is a constant thorn in its side, but Barclays now has a healthy core tier 1 ratio of 13.2%, up from 10.8% on 31 December 2012. If the UK economy continues to recover, Barclays will follow.

Earnings per share forecast to rise a whopping 67% this year, and another 22% in 2015. This only bolsters the case for buying Barclays. As does the rapidly rising dividend. The current 2.8% yield is forecast to hit 5.6% by December 2015. At a lowly price/earnings ratio of just 6.8 times earnings for December 2015, now looks a sound time to buy and hold for the long-term. 

Naturally, the Barclays share price could go even lower. Deutsche Bank recently lowered its target price from 325p to 320p, although it still calls Barclays a ‘Buy’. JP Morgan has trimmed its target price from 300p to 285p, while remaining overweight. Barclays hasn’t been this cheap for 18 months. You could wait for it to get cheaper, but frankly, it looks like a buy today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey doesn't own shares in any other company mentioned in this article.

More on Investing Articles

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »

Investing For Beginners

How I’d aim to grow my Stocks & Shares ISA from £20k to £1m

Jon Smith explains how diversification and focusing on sectors for the future can help grow his Stocks and Shares ISA.

Read more »