The Barclays (LSE:BARC) share price is almost 10% higher in the last month after hitting a three-year low of 136p in August. But can the FTSE 100 stalwart really deliver strong longer-term growth to double your money?
Barclays’ third-quarter results are due out on 25 October so the moves we make today could either deliver a huge boost to our portfolios or lose us a lot of money.
What the Barclays share price does have in its favour is the confidence of the market. According to shorttracker.co.uk and the FCA’s daily short positions monitor, none of the major hedge funds are currently betting on the bank’s share price to go down.
Considering the Brexit issue, when Boris Johnson delivered positive noises on a possible deal, Lloyds and Royal Bank of Scotland saw double-digit leaps in their share price.
Barclays is not as dependent as Lloyds on a Brexit deal for its future fortunes though. The bank has much more of a worldwide customer base and so is insulated to a certain extent from the volatility caused by British political turmoil.
Numbers tell a story
Yet the Barclays share price has been under severe pressure in the last 18 months, trending steadily downwards from a 217p peak in April 2018.
First-quarter results for 2019 showed a pre-tax profit of £1.5bn, down £200m from the year before as the firm slashed bonuses for its investment bankers.
Litigation charges against it could jump again. July saw Barclays named as one of five multinational banks, including RBS and JPMorgan, to be hit with a £1bn class action-style lawsuit for allegedly rigging pricing in foreign exchange markets.
Investors who have held Barclays shares over the last five years are down 36%. I think it’s tough to see where future growth is coming from to deliver a turnaround in the Barclays share price.
The epic rise of the digital-only UK challenger banks like Revolut, Monzo and Starling point to a new mobile-first banking world where Barclays is starting to look like a dinosaur. And the investment banking side of it has not performed well to deliver growth either.
In fact, earnings per share are expected to dip significantly lower by the end of 2019 before bouncing back in the early part of 2020, according to a consensus of City analysts.
Activist investor Edward Bramson, who tried and failed to get a seat on the board earlier this year, has continued his stinging criticism of the bank’s “destructive” and poorly-performing investment division.
Also a concern are the firm’s self-inflicted wounds. These include a heavily criticised decision to drop an agreement allowing customers to freely withdraw cash from Post Offices. The move will only save around £7m and as the only bank out of 28 rivals to pull out, Barclays will lose much more than it gains.
Buy or sell?
A dividend under 4% doesn’t make the share price an attractive bet for income investors, especially given that it’s not particularly cheap at 17 times trailing earnings.
Long-term structural weaknesses prevent me from recommending the shares, and in my opinion, it’s unlikely you can double your money with the Barclays share price.
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Tom Rodgers has no position in the shares mentioned. The Motley Fool UK has recommended Barclays. 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.