Barclays shares stages uneasy recovery amid uncertain global economic outlook
Barclays share price has begun to show signs of recovering from the impact of the Covid-19 crisis, but investors remain wary of British bank stocks with the threat of a no-deal Brexit around the corner.
Barclays share price has begun to show signs of staging an uneasy recovery, with the stock climbing 63% since hitting a low of 80p a share in early-April.
However, the stock, along with other members of the UK banking industry, faces a myriad of macroeconomic challenges, including the growing threat of a no-deal Brexit that could scupper its recovery from the Covid-19 crisis.
The low-interest rate environment is also making it exceptionally difficult for Barclays and its rivals to drive profits, with an expected uptick in bad loans due to the pandemic eroding lenders bottom lines and applying pressure on already incumbered share prices.
Barclays is trading at 131p per share at the time of publication.
Bank of England warns UK banks on Brexit
The Governor of the Bank of England (BoE), Andrew Bailey, warned UK banks to accelerate their preparations in the increasingly likely event of a no-deal Brexit, according to an earlier report by Sky News.
In his weekly call with UK bank chiefs, Bailey admitted that the BoE was pessimistic about the prospect of the UK and EU agreeing a trade deal, with negotiations struggling to make meaningful progress despite the December deadline for ratification fast approaching.
‘It is fundamental to the Bank of England's remit that it prepares the UK financial system for all risks that it might face. In performing that role, the governor meets the leadership of UK banks on a very regular basis,’ the BoE told Sky News.
‘As we have said previously, the possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months.’
UK banks warn half of ‘bounce back’ loans could default
British lenders warned that around 50% of the £18.5 billion in ‘bounce back’ loans to small business owners to offset the economic impact of the Covid-19 crisis will never be repaid, according to a recent report by the Financial Times.
The ‘bounce back’ loans are backed by the UK government and provide small business owners with a lump sum of up to £50,000. But UK banks are concerned that many loan recipients will either be unable to pay back the loans due to a lack of economic activity post-lockdown or simply because their business goes bust.
‘A lot of [the loans] will be written off or converted into something else.’ a bank chairman told the Financial Times. ‘The question is what's going to happen to all of these loans?’
How much does it cost to buy UK shares with IG?
There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).
Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.
Cost to get exposure to Lloyds stock
|Spread betting||CFD trading||Share dealing|
|Action||Buy £160 per point||Buy 16,000 share CFDs||Buy 16,000 shares|
|Capital required to open||£2000||£2000||£10,000|
Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.
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