Barclays Share Price Outlook Amid Investment Banking Woes

Summary:
• Barclays share price has pulled back in the past few days as the company made plans to reduce its operating costs.

Barclays share price has pulled back in the past few days as the company made plans to reduce its operating costs. The BARC stock rose to a high of 156p, which was the highest level since September. It has jumped by more than 16% from the lowest level this year. It has outperformed other banks since the KBE ETF has slumped by more than 30% this year.

Barclays cost-cutting

Barclays Bank’s business is going through a mixed period as interest rates surge. On the one hand, its net interest income has surged recently as global interest rates rise. The most recent earnings showed that its net interest income in the third quarter jumped from over £1.3 billion in 2021 to more than £1.5 billion this year. For the nine months to September, its net interest income rose to over £4 billion. 

On the other hand, its investment banking division is struggling as deals drop. In the third quarter, its other revenue rose from £335 million to over £355 million. This performance is mostly because of the company’s trading division. In the first nine month, its trading income jumped to over £6.5 billion.

It is against this backdrop that Barclays announced that it will lay off 200 people in its banking and trading desks this this week. The goal is to reduce the number of workers and then save capital as investment banking crashes. For example, equity issuance has plunged by 78% this year. Debt issuance has crashed as central banks hike rates.

Barclays is also facing the challenge of more delinquencies as interest rates rise and the possibility of a recession in its key markets increase.

Barclays share price forecast

The 4H chart shows that the BARC share price has been in a strong bullish rebound in the past few weeks. In this period, the stock has formed an ascending channel that is shown in black. It has also managed to move above the 50-day moving average while the MACD has risen above the neutral level. It is also at the 50% Fibonacci Retracement level.

Therefore, the stock will likely continue rising as bulls target the next key resistance at 160p, which is at the 61.8% retracement level. This view is in line with my most recent BARC stock forecast.