Barclays share price has soared: will its earnings change that?

Barclays (LON: BARC) share price has been in a strong uptrend this year and this week will be critical as it becomes the first major British bank to publish its financial results. The stock has surged from last October’s low of 124.25p to almost 200p today.

Barclays earnings ahead

Barclays share price has done well since it published its financial results in February. That jump was in line with the performance of other European banks like Lloyds, Unicredit, and HSBC.

These banks have surged because of the elevated interest rates in the UK and the European Union. The Bank of England (BoE) has maintained rates steady at 5.25%, its highest point in almost two decades.

High-interest rates are usually supportive of banks because they increase the net interest income (NII), which is a popular profit measure. 

At the same time, these companies are committed to boost their payouts to investors through dividends and buybacks. They are doing this because of their strong balance sheets, cash buffers, and their undervaluation compared to their American peers. The goal is also to increase its discount to its book value.

In the last financial results, Barclays announced that it would buyback shares worth about £1 billion. It also expects to return about £10 billion to shareholders between 2024 and 2026. The goal will be to continue reducing its CET1 capital ratio from 14% to around 13.5%.

Investors will be paying key attention to several metrics when it publishes its financial results this week. First, in addition to its top and bottom line, the market will focus on its trading business. Analysts expect the company’s fixed-income trading revenue dropped by 15% in the quarter. 

Further, the market will focus on its investment banking business. There are signs that the industry is recovering. In last week’s financial results, companies like JPMorgan, Citigroup, and Goldman Sachs said that the business was improving.

Data by Dealogic shows that investment banking revenue in the US, Latin America, and Europe has jumped by 40%, 37%, and 10% this year. Globally, the revenue has soared by over 12% to over $24.2 billion this year.

Barclays share price forecast

BARC chart by TradingView

The daily chart shows that the BARC stock price has been in a strong bull run after publishing its financial results.

It has jumped from a low of 124.26p in October to about 190p. The stock has constantly remained above the 50-day and 200-day Exponential Moving Averages (EMA).

Further, the stock has formed a break and retest pattern by moving back to 178.38p, its highest swing in February last year. This pattern is one of the most popular bullish signs in the market.

However, it is also slowly forming a double-top pattern at 194.50p, its highest swing this year. In most cases, this is one of the most bearish signs.

Therefore, the outlook for the stock is neutral ahead of its earnings. A move above the double-top pattern at 194.50p will point to more upside. The alternative scenario is where the stock drops because of the double-top pattern.

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