Barclays (LSE:BARC) shares are down 10% since the start of the year. Yet the coming month promises even more volatility, with various factors that could materially impact the share price. Being forewarned is being forearmed, so here’s my rundown in order to get my ducks in a row.
Quarterly results
On 28 April we’ll get the Q1 results for the bank. The firm has been building momentum, with solid recent earnings growth and ambitious plans to return significant capital through dividends and buybacks.
It’ll be interesting to note if it sees further momentum coming from higher forecast net interest income due to changing interest rate expectations. Given the potential for higher inflation due to the energy shock, rising interest rates around the world to counterbalance the impact would likely help Barclays. To what extent is hard to say, but I imagine some commentary in the earnings report should touch on this.
The focus on the Middle East will also be apparent to see how the region is performing. Over the past year, Barclays has been aggressively expanding in the region. Back in October, it received a provisional licence for operating in Saudi Arabia. This paves the way for the bank to offer a wide range of services. CEO CS Venkatakrishnan said at the time that “we are well-positioned to help clients access capital, transform and grow in this dynamic market.” However, the upcoming results should show whether the conflict has changed this view and if operations in the region have been hampered.
Of course, the stock will react to the headline revenue and profit figures. But after the full report has been digested, a second movement in the stock will be even more important for the medium-term direction.
Energy prices
Oil prices surged above $100 per barrel last month due to the conflict in Iran. Analysts estimate that if it stays around this level for another month, we could start to feel a material inflationary impact.
Even though this is a positive for Barclays in some ways, it could start to be damaging. For example, it could push consumers to tighten their belts when it comes to spending. The price impact is already being felt at the petrol pump. And I’ve seen flight operators issue warnings of pending price hikes. If people cut back in the coming month, Barclays could face a hit to transactional spending fees.
I think we’ll be able to get a much better sense of any changes in spending habits in the coming month. If early evidence emerges of a weak consumer, it could be damaging for the FTSE 100 stock.
The bottom line
The uncertain geopolitical landscape makes it hard to predict how Barclays shares will react in the coming weeks. My gut tells me we could see the stock under short-term pressure due to the situation in Iran. Further, with the price up 71% over the past year, I think the earnings benchmark is high. Therefore, I’m going to hold off buying now and look to tactically purchase if we see any sharp move lower over the next month.
