Barclays share price: brace for these tailwinds in 2024

Barclays (LON: BARC) share price has staged a strong recovery in the past two months as the management works to turn around the company. The stock jumped to a high of 154.20p on Wednesday, much higher than the November low of 128.36p. It remains in a correction after falling by over 16% from its highest point in 2023.

Barclays is entering 2024 with several tailwinds that could push its stock price higher. First, the company is cutting down costs as the management aims to boost profitability. In November, Barclays announced that it was slashing 900 jobs across all segments in a bid to save over $1.5 billion. These job cuts were in addition to the 450 it agreed to cut in September.

Second, there are signs that the mergers and acquisitions (M&A) business is making a slow recovery. We have seen several important deals in the past few months. For example, Bristol-Myers Squibb has announced several deals valued at over $20 billion. 

Last week, Nippon Steel unveiled a $14.1 billion deal to acquire US Steel while AstraZeneca has bought Gracell Bio for $1.2 billion. According to WSJ, total M&A deals in the fourth quarter rose to the highest point since Q2’22. 

Barclays is one of the biggest investment banking groups in the world and the largest one in Europe. It ranks as the sixth bank in global investment banking revenue in 2023 after JPMorgan, Goldman Sachs, BofA, Morgan Stanley, and Citigroup. In the third quarter, the company’s corporate and investment bank income fell by 6.3% to 3.1 billion pounds.

There is a likelihood that deal-making will continue in 2024 now that the Federal Reserve has pointed to rate cuts. In its December meeting, the bank pointed to three cuts in 2024 now that inflation has retreated in the past few months.

Third, monetary easing by the Fed and Bank of England (BoE) will likely benefit Barclays and other banks. In theory, banks tend to make more money in a period of high-interest rates since this increases their net interest income (NII). 

However, high rates have unintended consequences, including weak spending, high delinquencies, and low economic growth. In terms of delinquencies, Barclays reported a credit impairment charge of 0.4 billion pounds. Higher rates also lead to deposit flight as customers move to higher-yielding assets like bonds.

Therefore, these tailwinds could see Barclays continue its recovery in 2023. The other likely catalyst will be the company’s turnaround and restructuring strategy. Some analysts have recommended selling the investment banking business, which is struggling to compete with the likes of JPMorgan and Goldman Sachs. 

BARC chart by TradingView

BARC stock price has been in a strong recovery process after bottoming at 128.36p in November. The shares have recently flipped the key resistance at 142.78p into a support. This was an important price since it was the lowest level in August.

The stock jumped above the 50-day and 200-day Exponential Moving Averages (EMA). At the same time, the Relative Strength Index (RSI) is approaching the overbought level. Therefore, the shares will likely continue rising as buyers target the key resistance point at 163.62p, the highest swing in September and July this year.

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