Barclays shares are trading near their highest level on record after a strong multi month rally. The stock has risen for 5 straight months and is now up about 683% from its pandemic low. The surge has pushed the bank’s market value above £67 billion.
The rally has drawn attention to what could come next for the stock, which some analysts now see as stretched.
Barclays has been closely watched this year after comments by Donald Trump about capping US credit card interest rates at 10%. He raised the issue while focusing on cost of living concerns ahead of the mid term elections.
The proposal raised concerns for banks with large US credit card businesses. Barclays is one of them. Analysts, however, believe such a cap would face legal challenges. There is currently no law that allows the government to impose it.
At the same time, Barclays has benefited from a boom in trading and deal making, especially in the United States. Major US banks such as Goldman Sachs and Morgan Stanley recently reported strong results.
Data shows that the top 5 US banks generated a record $134 billion in trading revenue last year. That was helped by market volatility and political uncertainty. Trading revenue rose 15%, the biggest increase in 5 years.
Investment banking activity has also picked up. Deal making rebounded as demand for equity and debt underwriting improved. Many banks have been working through a backlog built up since the 2021 surge in transactions.
Analysts expect Barclays to benefit from the same trends. The bank is one of the largest global players in investment banking and trading.
Its most recent results already point in that direction. Barclays reported more than £3.1 billion in investment banking income, up from £2.9 billion a year earlier. Its statutory return on tangible equity rose to 10.1% from 8.8%.
The bank also raised its guidance for the year. It announced a £500 million share buyback and said it would begin paying a quarterly dividend. The move forms part of a broader plan to return £10 billion to shareholders.
Barclays shares have also gained as investors believe its motor finance issues are close to being resolved. The bank booked a £235 million charge to compensate customers. It had previously set aside £90 million.
Sentiment improved further after Chancellor Rachel Reeves delivered her budget speech. She chose not to introduce windfall taxes on banks, easing concerns across the sector.
From a technical perspective, the stock has rallied sharply. Shares have climbed to around 484p from a low near 116p in 2022 and 2023.
Some caution signs are emerging. The relative strength index has risen to 77, which is considered extremely overbought. The stock is also trading well above its long term moving averages.
This raises the risk of a pullback as prices move back toward historical norms.
The next major test for the rally will come on February 10, when Barclays reports its full financial results.