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The Barclays share price is rising in February. Should I finally buy for my ISA?

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Barclays (LSE: BARC) shares dipped a little on results day last Thursday, which often happens if the figures don’t quite match up to hopes. But the Barclays share price has since bounced back. The bank has been near the top of my Stocks & Shares ISA candidates list for years. Should I finally buy? 

These short-term ups and downs don’t mean much to long-term investors. And though Barclays shares have gained 68% since September, we’re still looking at a 15% drop over the past 12 months. That’s worse than the 10.5% FTSE 100 fall over the same period. So why the relative underperformance?

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For me, part of the reason ties in with what I see as the biggest risk right now. And it might be the cause of the market’s hesitation over the results. I’m talking of bad debts, and the banking sector is awash with them.

As a result of the pandemic, Barclays has recorded impairment charges of £4.8bn. I wasn’t expecting a figure that big. And I’m not surprised the Barclays share price took a minor hit after investors saw it.

The impairment trend does appear to be improving though, with the fourth quarter’s charge coming in 19% below Q3. And there was one significant piece of encouraging news — Barclays announced a full-year dividend. It’s only 1p per share, and it wasn’t unexpected. But it’s a start.

Banking sector weakness

We remember how well the banking sector performed after dividends were reintroduced after the financial crash, don’t we? Oh, hang on, it didn’t do very well at all. No, the Barclays share price has fallen 9.5% over the past five years. And it’s down 48% over 10 years.

For me, when deciding whether to add Barclays shares to my investment portfolio, what matters is the bank’s long-term prospects. That’s post-Brexit Britain, something that the Covid-19 pandemic has pushed to the back of my mind from time to time. And I have to remind myself that the future of UK banking still looks very uncertain.

From an investment perspective, I don’t worry too much about the economy in 2021. I’m more interested in how things will look in 2026, and in 2031 and beyond. The way some people talk, we could be forgiven for assuming we’ll bounce right back to 2019 levels of relative prosperity the moment we’ve all had our vaccinations. But I’m not that optimistic, and foresee a few tough years ahead.

Barclays share price valuation

Taking into account my cautious economic outlook, how does the Barclays share price look? I can’t help seeing a lot of pessimism still built into it, and I think it could actually be good value. Analysts are forecasting double-digit earnings growth for the current year. And Barclays’ price-to-tangible-asset-value is only around 0.5 — which looks cheap.

At the current Barclays share price, I find myself torn. But I think I’ll keep away for two key reasons. One is that I already own banking shares in Lloyds Banking Group, which is probably enough sector exposure. The other is that I think there are better buys out there, facing less uncertainty.

And being over 60, I prefer less risk these days.

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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. 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.

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