Barclays stock price skyrockets despite the profit warning

Barclays stock price skyrockets despite the profit warning
Written by:
Michael Harris
29th April, 13:35
  • Barclays expects a financial hit from the pandemic to be £2.1 billion
  • A drop of 38% in profits recorded for the first quarter as customers are unable to repay their loans
  • Barclays stock price surges nearly 8% higher as traders expected a harder financial hit

Shares of Barclays (LON:BARC) rallied more than 14% this morning in London, despite the issued warning that the pandemic could cost the bank more than 2 billion pounds.

Fundamental analysis: Better-than-expected situation

Traders must have expected a harded financial impact on the Barclays business as the stock price surged more than 7% higher following the profit warning issued by the bank. The UK-based banking giant said that the COVID-19 outbreak is likely to cost the bank around £2.1bn.

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“We have taken a £2.1bn credit impairment charge which reflects our initial estimates of the impact of the Covid-19 pandemic,” said Barclays’ boss Jes Staley.

The bank expects its profits for the first three months of this year to have plunged 38% to £913m. Despite a decreasing profit, the bank said it was having a positive quarter until the COVID-19 pandemic spread to Europe. 

“Given the uncertainty around the developing economic downturn and low interest rate environment, 2020 is expected to be challenging,” he added. 

Hence, a conclusion could be drawn that Barclays expects a bigger financial impact in the second quarter. The bank said that their biggest concerns are related to customers being unable to repay their loans. 

As a part of the Government-backed stimulus plan worth hundreds of billions of pounds, Barclays said it had already given 3,760 business loans valued at £737 million, in addition to allowing 238,000 customers mortgage and loan payment holidays.

Yesterday, Barclays’ rival, HSBC, reported a 50% fall in the quarterly profit amid the COVID-19 outbreak, with a pandemic hit estimated at £2.4 billion. 

Technical analysis: Stock price breaks higher

Shares of Barclays surged nearly 15% higher today as traders expected a harder financial impact on the quarterly earnings of the bank. The price action now broke out higher above the symmetrical triangle and the 100 MA on 4H chart. 

Barclays stock 4H chart (TradingView)

The buyers will be aiming for the 130.00 mark next, where an important horizontal resistance is located. We may still rotate lower from here to retest the broken triangle near the 95.00 handle. 

Overall, we advise you to be cautious as Barclays hinted that the second quarter may prove to be a bigger challenge from the earnings perspective, thus this move higher may lose its momentum soon.

Summary

Barclays stock price surged around 8% higher today, despite the profit warning from the banking giant. Customers not repaying their loans amid the COVID-19 outbreak is the biggest reason behind the expected £2.1 billion financial hit.

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