- Summary:
- Car finance crisis and falling interest rates have brought downward pressure on Barclays share price. But is that enough to subdue gains?
Barclays Bank share price traded lower in the mid-morning session on Thursday, seemingly unresponsive to the UK Government’s move to avoid raising new bank taxes in the budget read on Wednesday. The share price was down by 0.7 percent and traded at GBX 240.05 at the time of writing, reversing a significant portion of its 1.3 percent gains recorded on Wednesday.
What’s impacting Barclays share price?
The bank recorded impressive results in its third quarter earnings reported last week, announcing that it had generated £6.5 billion in revenue, against analysts’ forecast £6.39 billion. However, concern remains over a potential onslaught of refund claims from its motor vehicle loan customers. The UK Court of Appeal last week made a landmark ruling that declared illegal discretionary commission agreements between vehicle loans agents and banks.
The ruling potentially exposes banks to billions in refund claims from customers, and could adversely impact the revenues generated from banks’ car loans portfolio. Barclays, closed its car loans business in 2019, but could still be liable to pay hundreds of millions in refund claims for loans issued before that time.
The full extent of the claims could come to the fore once Financial Conduct Authority (FCA) completes its long-running investigatins into the practice. For context, nine out of ten vehicles bought in the UK in 2023 were financed through loans. Lloyds Bank‘s Black Horse division is the country’s largest car loan issuer and lent £15 billion worth of vehicle loans last year. However, two respondents in last week’s case, Close Brothers and FirstRand Bank have said that they will appeal against the ruling at the Supreme Court.
However, banks also have a reprieve after the newly-elected Labour Government’s first budget avoided imposing additional taxes on banks. Prime Minister Keir Starmer’s earlier comments in September were seen as signaling potential tax hikes against banks, but Wednesday’s budget read by finance minister Rachel Reeves mentioned no such thing.
UK banks could also incur significant revenue loss as the Bank of England is expected to cut interest rates in November. However, the impact could be reduced through structural hedges.
Barclays share price prediction
The sellers are currently in control of the Barclays share price momentum, and the downside will likely prevail if resistance persists at 240.40. That will likely see the stock find the first support at 239.75. However, a stronger downside momentum could break below that level and test 239.30.
Alternatively, moving above 240.40 will put the buyers in control. The upward momentum will likely encounter the first resistance at 241.00. However, an extended control by the buyers could breach that barrier and render the downside narrative invalid. Also, the momentum could push the price to test 241.55.
