Barclays share price is down by more than 1.25% today as investors continue worrying about the possibility of a no-deal Brexit. The shares are trading at 144.40p, which is 4% below last week’s high of 150p. Other London banks are also struggling, with HSBC, Standard Chartered, and NatWest being in the bottom 20.
Investors are terrified about the possibility of sustained disagreements between the UK and the European Union. If the week ends without a deal, it will increase the possibility that the two sides will have a bitter divorce.
This has immediate consequence to UK companies, including Barclays. For one, it is estimated that the situation will have a 2% hit to the overall economy. Also, there is a possibility that more companies would leave the UK, which would lead to more than 300k jobs. Worse, this would happen at a time when the UK is in a sharp contraction.
Notably, the situation would necessitate further action by the Bank of England, with negative rates in play. This would lead to less profitability and an impact to the Barclays share price.
Barclays Bank has an edge
However, unlike other banks like Lloyds and NatWest, Barclays generates vast amount of income abroad. It also has a large trading franchise, that would help cushion it from a full-scale crisis. Indeed, the Corporate and Investment Bank (CIB) division has helped the bank be profitable this year.
In addition to the CIB bank, another catalyst for Barclays share price is that the bank could actually write back some of the bad debt it provisioned this year. That’s because, according to the new IFRS accounting standards, the bank is required to “recognise upfront lifetime loan provisions.”
Another potential catalyst for Barclays is that the bank is in a strong financial position. This means that it could return back to paying dividends in the coming year.
Is a no-deal Brexit possible?
Back to Brexit. While it seems like the situation is a bit difficult, in my opinion, it will be impossible for Boris Johnson to push the UK out without a deal. That’s because of the fact that the outstanding Brexit issues can be solved. And, the two sides have a lot at stake.
For example, more than £300 billion of EU goods and £200 billion of UK goods would be tariffed. Also, the disruption in trade would have a major hit to the two sides.
Barclays share price technical outlook
Turning to the daily chart, we see an important thing. We see that Barclays share price dropped to 134.32 last week where it found a lot of resistance. This was a notable level considering that it was the highest level in June. It was also slightly above the 50% Fibonacci retracement level.
It remains above the 50-day and 25-day EMAs and is close to the psychological level of 150p. In the near term, I suspect that the shares will continue rising as bulls attempt to clear the 150p resistance.
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BARC share price chart
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