Barclays shares rally following COVID vaccine news

Following what’s been a disastrous year for all banks, Barclays shares enjoyed an upswing in November. The promise of COVID-19 vaccines from Pfizer, Moderna, and others has buoyed markets across the board. The Barclays share price was up 40% by mid-November from 107p to 150p. Interest has since subsided, but shares remained above the November-low at 142p when trading began on 2 December.

Barclays shares buoyed by vaccine: but is it enough?

For what’s been a dire year, the late rally has generated some interest in Barclays prices. However, the Evening Standard’s Simon English has advised investors to ‘stay well back’ from banking shares. Even though he acknowledges the positive impact COVID-19 vaccines could have, the latest upswing, for him, means one of two things.

Either the market is in the ‘midst of a mini-rally’ and the ‘good times are around the corner’, or the bump has come and gone. In support of the former, banks enjoyed a fruitful third quarter (Q3). Looking at Barclays' Q3 report, group income was £16.8 billion. That’s a year-on-year (YoY) increase of 3%. Corporate and investment bank income was up 24%, taking group profit before tax to £2.4 billion. Even under tough operating conditions, Barclays has shown the group ‘remained profitable in each quarter’.

Taking a broader perspective on the Barclays share price, the current value is still lower than 2019’s peak. Tracking the data, Barclays shares reached 192p on 17 December 2019. Even at their best in 2020, the Barclays share price was 21% lower at 150p. Investec’s Ian Gordon has added to the bearish sentiment, suggesting that prolonged restrictions in the UK could hurt banking, moreover, Barclays. In his view, the ‘outlook remains problematic’.

Banking break-up could hamper Barclays share price recovery

British banks may also be facing political resistance on another front. Away from continued COVID restrictions, a recent APPG report could prompt changes across the industry at large. A two-year inquiry into competition within the UK banking sector has revealed ‘poor practices’ and ‘predatory pricing models’.

The news comes as challenger bank Monzo launched its third new account and gained more account switches than any other UK bank in November. The APPG report has called for a ‘break-up’ ‘demerger’ of the major banks, including Barclays. Whether or not this comes to pass is anyone’s guess.

The Competitions and Markets Authority (CMA) proposed a similar strategy in 2016. However, what’s clear is that conditions are ripe for change. COVID-19 has stretched the market and, even when life returns to normal, it may not be the 'normal' we remember. Barclays shares have rallied, which has generated some buzz. However, experts remain cautious and can’t seem to find a reason to break their bearish forecasts.

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