Barclays Share Price Faces Headwinds Despite Better-than-Expected Q2 Profits

Barclays share price has been under intense pressure for the past few days despite recording remarkable profits for the second quarter. The BARC stock has dipped by more than 7% in the past week and is down by 4% in the year to date. At press time, the BARC stock price was trading 1.10% lower at 153.10p.

Q2 Earnings Beat Expectations

Barclays share price has been among the worst-performing stocks in the UK’s blue chip FTSE 100 index for the past few days amid increased volatility in the European banking sector. UK financial bigwigs, including NatWest Group, Lloyds Banking, and Prudential among others have also been under pressure over the past few days.

Barclays announced last week that it expects the tailwinds from rising rates to be slowing despite reporting stronger-than-expected earnings in the second quarter. The British banking giant cut its guidance for the net interest margin of its retail bank, a potential drag on earnings as the rate hike campaigns by central banks come to an end.

Barclays reduced the net interest margin outlook for its domestic bank for this year to 3.15%, down from 3.2%, pointing to customers’ hunt for better yields to battle higher rates and further macroeconomic developments. As such, the bank is likely to receive less money from the interest it makes on loans and from the interest it pays on deposits.

In its report, Barclays recorded a 31% jump in its profits to £2 billion, ahead of analysts’ expectations of £1.9 billion. Its consumer and card payment divisions climbed by 14% and 18%, respectively, during the second quarter, pushing the bank’s net income to £1.3 billion. Barclays also announced an increase in its share buyback programme to £750 million and paid out a dividend of 2.7p per share, up from 2.25p last year.

The bank also recorded higher balances in the United States as well as growth in its clients. Even so, the company reported a slowdown in momentum in investment banking, with the revenue in the sector dropping by 3% in the quarter. Operating costs also came in 6% lower Y/Y.

Barclays Share Price Forecast

The daily chart shows that the Barclays share price has been on a bearish trajectory for the past few days amid macroeconomic headwinds. The stock remains slightly below the 25-day and 50-day exponential moving averages, as well as the 25-day and 50-day moving averages.

As such, I expect the current bearish outlook on the Barclays share price to be short-lived. The stock is likely to enter consolidation mode as it struggles to find direction as bulls gather enough momentum to push the price higher. If this happens, the next resistance level to watch will be 164p.

BARC Price Chart

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