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Why I think the Barclays Bank share price could keep climbing

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The Barclays Bank (LSE: BARC) share price has been climbing since the beginning of the year. The stock is up around 30% since 2021 opened. Over the past 12 months, its performance is even more impressive. Shares in the lender have increased in value by nearly 100%, excluding dividends.

I think this trend is set to continue as the UK economy presses ahead with its reopening plans and businesses start to recover from the pandemic. 

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Barclays Bank share price outlook

Barclays is much more than a bank. As well as the traditional banking business lines of taking deposits and making loans, the group also owns the giant Barclaycard credit card concern. Alongside this business sits a massive investment bank. 

The group has faced pressure in the past to spin off this investment bank. However, it proved invaluable throughout the coronavirus crisis.

As its traditional banking business suffered, Barclays’ traders reaped enormous profits from companies looking to raise more money on the stock market, or from bond investors via the investment bank. These profits offset losses in other parts of the group. 

As such, while the lender did book losses on its loan portfolio due to the pandemic, it has so far managed to navigate the crisis reasonably well. 

I think this suggests its recovery could be strong as well. An increase in consumer spending could translate into higher revenues from its Barclaycard business.

At the same time, increased business confidence may improve demand for loans from its traditional banking division. The UK’s booming housing market may also lead to an increase in demand for mortgages. 

All of the above points me to the conclusion that the Barclays share price could accelerate higher in the near term. Increased lending may lead to increased revenues, producing higher profits. And higher profits would justify a higher stock price.

Risks and challenges

That’s not to say the group doesn’t face risks and challenges. Another wave of coronavirus could delay the UK reopening schedule. After a year of disruption, many businesses may struggle to survive another wave. This could lead to a spike in bankruptcies. Consumer confidence may also suffer. This would hit the recovery at Barclaycard.

In this scenario, the company’s profits may fall significantly. This would justify a lower Barclays share price. 

Still, I’d buy the bank for my portfolio today as a recovery play despite these risks. Yes, another wave of coronavirus could destabilise its recovery, but that’s a risk all companies face right now.

In my opinion, the group has been able to manage the crisis well up to this point. I think this implies it may do well the next time around. If there is a next time. Of course, this is just my projection. There’s no guarantee Barclays will prosper in another lockdown. 

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Rupert Hargreaves owns no share 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.

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