It’s been a sticky 2014 for investors in Barclays (LSE: BARC) (NYSE: BCS.US), with the share price down nearly 4% since January. Like the FTSE 100, it’s gone nowhere fast.
Mis-selling scandals, rate fixing, the ‘dark pool’ nightmare, banker bonus bust-ups, plunging investment bank profits and the stumbling global recovery have all dragged it down.
The scandals will continue in 2015, but is Barclays worth investing in anyway?
Ride The Recovery
At some point, Barclays will escape the toxic swamp it has plunged into, and the share price will fly. I wrote that we had hit the ideal buying point in July, with the share price at 209p.
It is up 15% since then to 242p, but is still well below its 52-week high of 297p. But that suggests to me that despite its recent gains, there is scope for sentiment to sweep it higher.
Trouble is, sentiment is in short supply right now. Even recent news that UK GDP is up 3% over the past 12 months failed to excite markets, worryingly, given that most people expect slippage next year.
A buoyant housing market would help, so it’s worrying that house purchase approvals fell 16% year-on-year in October, according to new figures from the British Bankers’ Association.
With an election looming, the property slowdown could continue next year.
Investment Banking Is Back
But there’s also good news out there, with Goldman Sachs recently upgrading Barclays from neutral to buy (target price 300p), after the Bank of England set surprisingly modest capital requirements. With the lowest leverage ratio, Barclays was considered most at risk from tough action.
There has been some good news at last for its retrenching investment banking division, with Barclays recently now planning to increase its staff in North Africa and the Middle East by up to 20%.
The Price Is Right
The Forex, PPI and dark pool scandals will rumble on in 2015, with “severe” penalties sucking money out of Barclays. So brace yourself for that.
On the plus side, Barclays’ earnings per share are forecast to rise a healthy 26% in 2015. The bank is on a forecast price/earnings ratio of just 9.1 for Christmas next year. By then, it could yield 4%, as the dividend recovery continues.
I still think that Barclays is one of the biggest bargains on the FTSE 100. It may not make you rich in 2015, but if you buy now and hold for the long term, the riches will eventually flow.
