Why Barclays’ share price weakness makes it my top FTSE 100 buy now

The Barclays (LSE: BARC) share price has fallen in 2022 so far, despite an impressive set of 2021 results. It’s a buy for my portfolio.

| 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 (LSE: BARC) reported bumper profits for 2021, recording a pre-tax figure of £8.4bn. It’s a bank with diversified business interests, including domestic retail operations, international credit and payments systems, and investment banking arms. It’s a recipe for a strong Barclays share price, right? Well, no.

Despite Barclays posting the kind of results that could turn other banks green with envy, the shares are down 15% since their mid-January highs. We’ve seen a gain of 11% over the past 12 months, but that’s only in line with the FTSE 100. And it’s worth remembering that the index average includes some big losers, like IAG (down 23% in 12 months), Fresnillo (down 25%), and Flutter (down 28%). So why is a profitable bank out of favour? And is the Barclays share price set for a 2022 resurgence?

Uncertain outlook

The departure of popular CEO Jes Staley, who left in November in the midst of a probe into his relationship with Jeffrey Epstein, can’t have helped. I’ve seen several commentators describing his successor, CS Venkatakrishnan, as boring. But they go on to suggest that boring is exactly what the Barclays share price needs now. Still, I reckon it could take some time to see how the relationship between big investors and the new boss develops.

More than that, though, we’re in a time of global crises. Economies are heading out of the pandemic in a shaky state. UK growth might have rebounded to 7.5% in 2021. But that doesn’t compensate for 2020’s shrinkage, so I think it’s premature to speak of sustained growth just yet. And then there’s the Russian invasion of Ukraine, which pushed oil above $100 per barrel. On top of already escalating energy prices, that could put a serious crimp in our medium-term economic outlook. And whatever hurts the economy hurts the banks.

Why am I bullish?

So what makes me feel positive about the Barclays share price now? Firstly, despite a period of near-zero interest rates, Barclays managed to keep its profits healthy. Even in 2020, the bank recorded profits of £3.1bn, which is in part thanks to Barclays’ diversified businesses. But I can’t help wondering what difference rising interest rates might make in 2022. I wouldn’t be surprised if that could add a couple of billion to the bottom line.

Against that, 2021 performance was boosted by the release of £700m of cash set aside to cover bad loan risk. There’s still a fair chunk of such reserves left, and hopefully more of that will be released. But we probably won’t know the long-term impact of bad-debt risk for a while yet.

Barclays share price too low?

I do think we need to hold back from getting too excited about the UK’s economic recovery. But while I say that, debit and credit spend in January 2022 did exceed pre-pandemic levels of January 2020. And that has got to be a good sign.

On the latest earnings and the Barclays share price at the time of writing, we’re looking at a P/E of only five. Despite the clear economic risks, that looks too cheap to me. Barclays is at the top of my own FTSE 100 buy list.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Fresnillo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

UK money in a Jar on a background
Investing Articles

With a 10.1% yield, should I buy this FTSE 250 income stock?

Our writer looks at an income stock that’s kept its dividend unchanged for five years. But is it high enough…

Read more »

Investing Articles

Up 23% in a month, can this FTSE 100 stock continue to soar?

Airtel Africa's recently been the FTSE 100’s top-performing stock. With huge opportunities for growth ahead, is it set to continue?

Read more »

Investing Articles

£20,000 in savings? Here’s how an investor could use it to target an eventual £980 of passive income each month

Our writer demonstrates how an investor could aim to earn close to £1,000 each month in passive income from a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

£10,000 invested in the S&P 500 at the start of 2025 is now worth…

Since the start of the year, the S&P 500's underperformed the FTSE 100. And Stephen Wright thinks investing in the…

Read more »

Investing Articles

Is this a turning point for the Diageo share price?

The Diageo share price is at an eight-year low. Is this FTSE 100 favourite simply too cheap to ignore? Roland…

Read more »

Investing Articles

As the FTSE 100 hits record highs, should I sell my shares and buy an index fund?

Our writer’s portfolio lagged the FTSE 100 last year, but he’s not giving up on stock-picking and highlights a recent…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Lloyds shares 6 months ago is now worth…

Lloyds shares have performed well over 12 months but have broadly disappointed investors over the long run. Dr James Fox…

Read more »

Investing Articles

£20,000 in savings? Here’s how investors can aim for a £4,000 monthly second income

Millions of investors use the Stocks and Shares ISA as a vehicle to build wealth and generate a second income.…

Read more »