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So far, this calendar year has been disappointing for the long-suffering owners of Barclays (LSE: BARC) shares. The stock is down more than a fifth (-21.7%) from its March high and has lagged the wider FTSE 100 index in 2023.
Barclays shares slide
At first, things looked rosy for Barclays stock by spring 2023. On 8 March, the share price hit a 52-week high of 198.86p. Within days, the regional US banking crisis sent financial shares plunging worldwide. By 20 March — just 12 days later — the Barclays share price had collapsed to a 52-week low of 128.12p. Ouch.
As I write, the share price stands at 155.62p, valuing the business at £24.2bn. Here’s how the Blue Eagle bank’s shares have performed over seven different timescales:
| One day | +0.1% |
| Five days | -3.4% |
| One month | +2.8% |
| Year to date | -1.8% |
| Six months | -16.6% |
| One year | +3.5% |
| Five years | -17.5% |
My table shows that this FTSE 100 stock is down a sixth over six months and even further over five years. Also, it has lost 1.8% of its value in 2023, versus a 3.3% rise for the blue-chip index. (However, all of these figures exclude cash dividends, which are substantial for Barclays owners.)
What’s gone wrong for the bank?
After the bank released its first-half results on Thursday, Barclays shares dipped. Despite rising profits at its UK retail arm, weak results for its investment bank sent the shares slumping over 5% at the market open.
Group revenue dropped by 6% to £6.3bn, below market expectations of £6.5bn. Even so, net profit rose by almost a quarter in the second quarter, lifted to £1.3bn by higher interest rates.
That said, there were two pieces of good news for shareholders. First, the bank launched a new share buyback of £750m (versus £500m spent in the first half). Second, the bank lifted its interim dividend by a fifth to 2.7p a share, from 2.25p last year.
I’m still bullish on banks
For the record, my wife bought Barclays shares for our family portfolio last July at 154.5p a share. Hence, we are up a mere 0.8% after more than a year — hardly a mouth-watering return.
Then again, we bought this stock to provide us with extra passive income for years to come. What’s more, the shares still look dirt-cheap to me today. They trade on a price-to-earnings ratio of 4.5, for a whopping earnings yield of 22.3%.
Also, assuming the total dividend is boosted by 20% to 8.7p from last year’s 7.25p, then the shares offer a prospective dividend yield of 5.6% a year. Yet this higher payout would be covered almost four times by trailing earnings.
However, I fully expect Barclays’ full-year earnings to take further knocks from credit contraction, margin erosion, and rising loan losses. Despite this, I would eagerly buy more shares today — had I the spare cash to do so, that is!
