Looking at the share price chart of Barclays (LSE: BARC) (NYSE: BCS.US) may cause some investors to feel despondent.
Indeed, shares are at their lowest point in 2013 and have been on a general downward spiral since it was announced that the regulator, the FCA, was unhappy with the bank’s leverage ratio. The response from Barclays was to have a £5.8 billion rights issue, with the proceeds used to sure up the balance sheet and improve the leverage ratio so as to appease the regulator.
Furthermore, as a shareholder in Barclays I also feel slightly fed up with investing more money in the business via the rights issue, only for shares to now be considerably below the theoretical ex rights price.
However, focusing on the share price chart, there could be scope for considerable gains in Barclays, with shares having the potential to reach 300p.
Indeed, over the last year, stable mates Lloyds and RBS have delivered capital gains of over 70% and just under 20% respectively, while Barclays has returned just 7%. Clearly, there is a wide difference in returns but it could be the case that Barclays is behind the curve, with it having the potential to deliver much better gains in future.
For instance, it is unlikely that the vast divergence in share price performance between the three UK-focused banks will continue into the medium to long term future. Of course, a narrowing of performance could mean that Barclays performs less badly than its peers but, with the UK economy continuing to post positive data, it appears as though it could be a sector on the up.
Therefore, the potential for positive news flow could mean that Barclays is behind the curve and is able to close the gap on Lloyds and RBS as the picture for the whole sector continues to improve. It could also be the case that shares have thus far been held back by niggling concerns surrounding the leverage ratio and rights issue, with the market waiting to see how Barclays looks under the microscope over the short to medium term before making a positive call on the bank.
Of course, Barclays has been as high as 330p this year, so the potential for it to trade within 10% of that figure clearly exists. Doing so would mean shares trade 20% higher than their current price level: the last time Barclays was at 250p it reached 300p within two months. It may take longer this time but a 20% gain seems to be within its grasp.
> Peter owns shares in Barclays.