Last month was positive for holders of Big Four bank Barclays (LSE: BARC) shares. Its stock rose strongly as the London market rebounded from March’s lows.
Shares soar, then slump
My wife bought Barclays stock in early July last year. Including dealing commission and stamp duty, she paid a total of 154.5p a share.
On Friday, the share price closed at 159.88p, valuing the Blue Eagle bank at £24.9bn. But the shares have ridden a rough roller coaster since American banks wobbled and then fell.
At their 52-week high on 8 March, Barclays shares peaked at 198.86p. However, within days of this top, the stock plunged.
On 20 March, the shares hit a 52-week intra-day low of 128.12p. Remarkably, they’d collapsed by more than a third (-35.6%) in just 12 days.
What caused this price collapse?
The root cause of crashing UK bank stocks was a series of US bank failures.
First, Silvergate Bank announced on 8 March that it was to wind down, following large losses in its loan portfolio. Then a bank run on tech-focused Silicon Valley Bank led to regulators seizing it on 10 March.
Two days later, on 12 March, it was the turn of Signature Bank, also closed by US regulators. Then Swiss giant Credit Suisse was forcibly taken over by its larger rival, UBS.
Happily, no depositors lost money as a result of these four major bank failures. However, shareholders and bondholders at the three failed US institutions were wiped out overnight.
Barclays stock bounces back
Here’s how the Barclays share price has performed over eight different periods:
| One week | +3.5% |
| One month | +12.6% |
| Three months | -13.6% |
| Six months | +9.2% |
| One year | +9.3% |
| Two years | -15.4% |
| Three years | +63.5% |
| Five years | -23.9% |
My table shows that the Barclays share price jumped in April. Also, it’s up almost 10% over the past year.
Then again, the stock has been a long-term lemon, losing close to a quarter of its value over five years. However, the above returns exclude cash dividends, which would add several percentage points a year to these figures.
Panic over?
Clearly, the rise in Barclays shares from their 20 March low was driven by investors’ relief that America’s banking crisis was being contained. Indeed, larger US banks saw their deposits surge as savers rushed to the safety of the biggest players.
However, today brought news of another US bank collapse. This time, the candidate was First Republic Bank. After being seized by regulators, its deposits and assets were sold to America’s largest bank.
Notably, there have been no such UK bank runs. Indeed, I regard British clearing banks as being rock-solid. In my mind, there’s simply no way that this government would allow any repeat of the banking carnage of 2008.
I’d buy Barclays shares today
To me, Barclays stock is one of the FTSE 100’s most undervalued. With a price-to-earnings ratio of 4.9 and a dividend yield over 4.5%, it appears a beautiful bargain.
Though my family already owns Barclays shares, I’d gladly buy more today — if I had the spare cash, that is. Of course, I could be wrong, as bank stocks are hardly in favour right now. Looking ahead, I await the bank’s first-half results on 27 July. Fingers crossed!
