Barclays Share Price Darts Higher After Strong Earnings – Time to Buy?
Barclays share price gapped higher in early trading as investors reacted to the upbeat third quarter earnings. The shares are trading at 107.12p, which is slightly below the intraday high of 109.02.
Barclays strong earnings
As I have written before, Barclays is among the best UK banks to invest in because of the diversity of its business. The company operates two main segments. The UK segment deals with the lending business while the international business includes its large trading division. Therefore, the two segments tend to help each other as evidenced by the latest earning results.
The company reported a net profit of more than £611 million, which was almost double the £273 million that analysts polled by Reuters were expecting. The surge in profits was because the bank allocated less money to bad debt provision and the string performance in the trading division. In a statement to CNBC, the bank’s CEO, Jes Staley said:
“In the first half of this year we took a very, very robust impairment charge and our impairment reserves, so our reserves for credit losses, is well north of £9 billion right now.
The trading division did well as its revenue rose by 29%, higher than the expected increase of 21%. Separately, securities income rose by 23% while equities rose by 40%.
Barclays share price also rose because of the relatively strong domestic market. This performance was expected considering that mortgage applications in the UK have been relatively strong recently.
So, is BARC share price a buy?
Barclays share price has been under pressure recently. This has seen its stock price drop by more than 40% year-to-date. This was because of the large impairment charges it announced in the first and second quarters and the fact that UK banks have been prevented to pay dividends. Also, investors have been worried about negative interest rates.
Still, for long-term investors, it makes sense to invest in Barclays for three main reasons. First, unlike banks like Lloyds and NatWest, it has a relatively diversified business that will cushion it even when rates go negative. Second, it is in a strong cash position as evidenced by the common equity tier one capital ratio, which rose to 14.6%. Its return on tangible equity (RoTE) also rose by 5.1%. All this means that the firm will be able to deliver dividends to its shareholders once the curbs end.
Barclays share price technical outlook
On the four-hour chart, we see that Barclays shares gapped upwards to a high of 109.12p. As it rose, the price moved above the descending trendline shown in purple. This line connects the highest points in July and October. The price also moved above the 50-day and 25-day exponential moving averages. It also moved above the triangle pattern.
Therefore, I suspect that the price will continue rising as bulls aim for the next resistance level at 120p. On the other hand, a move back to the triangle pattern will invalidate the bullish thesis.