In a week like this one, fewstocks escape unscathed. The crisis may have started in China but it swept through the FTSE 100, and the big banks were hardly likely to be immune. At time of writing, Barclays (LSE: BARC) is down 10% from this years starting price of just under 205p.
Scandal!
So what has Barclays done to deserve this? For once, it isnt the architect of its own downfall. There has been no mis-selling or rate-rigging scandal ALLWEEK! That should be cause for celebration, but events on the other side of the world have conspired against it. This is an important point, because precious little has changed about Barclays over recentturbulent days. It is still the same company it was at the end of 2015. The only material thing that has changed is that you can buy its shares at a 10% discount to Monday.
The lower share price has left it trading at 11.9 times earnings, a slightly more tempting price thanbefore. Wise investors take advantage of opportunities like these. It is why so many of us actually prefer to go shoppingwhen share prices fall, rather than cringing and running for cover.
Not only are Barclaysshares cheaper, but its yield is higher. Itnow yields nearly 3.2%, up from 2.90% just a few days ago (if only savings rates had risen that fast). The big bad bankhas taken a long time to claw its way back to dividend respectability, but on a forecast yield of 4%, it is now well on course to achieve that.
No News Is Good News
There is little new to say about Barclays this week, aside from the fact that it is 10% cheaper. Did I mention that? There is talk offurther cost-cutting, mostly affecting its cash-equities and investment banking divisions in Asia. The decision to focuson theprofitable marketsof the US, UK and South Africa sounds sensible, although hardly a market mover.
There has also beentalk that the UK could hold itsBrexit referendum as early as June, and some feara vote to quit the EU would sink the financial services industry. It is a worry, although hardly specific to Barclays. This week, Mark Astaire, a senior investment banker at Barclays, look to soothe nervesby claiming the City of London would remainEuropes top banking sector in 10 years time, whatever happens.
Worse to come?
Now just because Barclays is 10% cheaper doesnt mean it wont fall further. It fell 10%last year, andin 2014 as well, for that matter. Itremains a business on the back foot and further cutbacks are expected, notablyin its floundering investment banking division. Remember, its last set of results for Q3, published in October, showedadjusted profit before tax falling 10% to 1.43bn.
2016 is clearly going to be a volatile year, hitting companies both good and bad. ButBarclays is still 10% cheaper than a week ago, and that makes it a 10% better buy than it was.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
