Barclays share price: where next as stock continues its descent?

British banks are struggling against a backdrop of low interest rates, Brexit uncertainty and a competitive mortgage market, with Barclays woes reflected in its share price.

Barclays Source: Bloomberg

Over the last 12 months, Barclays share price has fallen more 22% as British banks continue to contend with low interest rates, the prospect of a no-deal Brexit and a highly competitive mortgage market.

With the Bank of England hinting that it will lower interest rates further in the event of a no-deal Brexit, Barclays and other British lenders face the prospect of increasingly smaller margins and increased pressure on their respective share prices.

Barclays deepens cost cutting to hit profit target

In early-August, Barclays reported an 82% increase in profit to £3 billion in its half-year results, a strong performance considering the challenging market conditions that the lender must contend with.

However, despite its strong showing, the bank opted to deepen its cost cutting in response to the global economic slowdown and the prospect of the UK bailing out of the EU without a deal on October 31.

In its second quarter, Barclays cut more than 3,000 jobs across the group, while Jes Staley continues to stress the importance of reducing capital expenditure in order to deliver returns for shareholders.

‘Management focus on cost control remains a priority, and we expect to reduce expenses to below £13.6bn for 2019,’ Staley told reporters on a media call following its half-year results.

‘This all puts us in a position to continue to increase the return of capital to shareholders by declaring a half-year dividend of 3p,’ he added.

The lender also plans to deepen its cost-cutting by reducing bonuses and lowering its overall capital expenditure, helping bring its spending below £13.6 billion instead of its previous guidance for costs in the range of £13.6 billion to £13.9 billion.

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Barclays share price finds support

Despite the bank’s share price sliding more than 22% over the last 12 months of trading, so far this year, its stock has remained relatively resilient.

On a year-to-date basis, Barclays stock is down just 2%, a testament to its performance this year and more reflective of what is, and continues to be, an extremely trying environment for British lenders.

‘Margin pressure in the UK mortgage market has dented income at home, while the corporate and investment bank has done better than a relatively pessimistic market had expected,’ Hargraves Lansdown analyst Nicholas Hyett said.

‘The UK retail market looks like it's becoming more and more competitive, particularly mortgages, and a squeeze on margins at the same time as the economic outlook is weakening is a potentially unpleasant combination,’ he added.


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