Market Analysis

Barclays share price reverses gains as UK rating downgrade weighs on sentiment

Barclays share price briefly spiked higher on the FTSE on Thursday after the banking giant reported a net profit of £1.4 billion for the whole of 2018. Barclays had reported a loss of £1.92 billion during 2017 after the bank was unexpectedly hit by a one-off £901 million charge on deferred tax assets from the United States.

The news that Barclays posted a profit last year caused its share price to trade around four percent higher on the London FTSE, although the upside gains were short-lived as the recent bearish news from Tiger Global and fears of a potential ratings downgrade for the UK economy continued to weigh on investors mind. Tiger Global, which is one of the major shareholders, had sold down its stake in Barclays this week, due to the companies weak performance in its investment bank division.

Barclays released its full-year report one day after the rating agency Fitch said that it might downgrade the United Kingdom’s “AA” debt rating. Fitch said the potential rating cut was based on growing uncertainty coming from negotiations between the UK and Europe over Brexit, that could eventually lead to the worst-case scenario, where the United Kingdom leaves the trading block without a deal in place.

Barclays end of year report showed the bank posting a profit of £5.7 million before tax, which marked an increase of nearly twenty percent from the previous year. Barclays revealed earnings per share, excluding litigation for the full year, at 21.9 pence, and also reported its 2018 core capital ratio at 13.2 percent, which remained unchanged from the previous year.

Company CEO Jes Staley said that the bank is setting aside £150 million for Brexit provisions, as the bank battens down the hatches for the potential consequences of a hard-Brexit scenario. Inside Barclays fourth-quarter report it stated that the bank categorized the £150 million as a special impairment charge for uncertain Brexit outcomes.


Barclays PLC Daily Mountain Chart | Source: ActivTrader

Barclays PLC Daily Mountain Chart | Source: ActivTrader 


The technicals for Barclays share price still remain bearish over the long-term horizon, as Brexit and unfavourable fundamentals in the banking sector weigh on investor sentiment. The trend will remain bearish until we see a confirmed breakout above the stock’s 200-day moving average, which is currently located around the 175.00 level. In the near-term, a bullish triangle breakout has occurred, although momentum remains weak following yesterday’s strong intraday reversal from the 168.00 level.


Written by Nathan Batchelor, External Analyst


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