Since late March, the Barclays (LSE: BARC) share price has climbed 20%. Have we missed a great chance, or is there still time to buy?
Still down
Well, Barclays shares are still down over five years. And I think they look super cheap right now.
The past five years have brought dividends. They were cut due to Covid, but the five-year dividend haul looks good to me.
The forecast dividend yield stands at between 4.5% and 5.5% depending on who we ask. I see anywhere in that range as attractive. And the City expects it to rise in the next few years too.
We often see the big players in the market steer clear of shares that might look a bit wobbly in the short term. But that can give private investors an edge if we go for the long term.
Big City fears
Why does the market have such a big down on Barclays? Well, it seems it’s down to recent US bank scares.
If it looks like there’s a chance a bank could go bust, the big institutions out of the sector as a whole. It doesn’t matter that the failed US banks were poorly regulated and badly managed.
Or that UK banking regulation is strong, and that Barclays’ liquidity looks very good. At least, that’s what I take from Q1 results.
Beating expectations
For the quarter, Barcays posted a profit of £1.78bn. That was 27% ahead. And it beat the City’s forecasts.
On the liquidity front, the bank reported a CET1 ratio of 13.6%. That gives us an idea of how much of its assets are close to hand in case of short-term need.
It’s a bit down on December’s 13.9%. But that’s after a £500m share buyback announced at the end of last year.
In short, this doesn’t look like a bank that faces any liquidity threat to me. Certainly nothing close to those over-stretched US banks.
Bank stability
This all makes me think the FCA got it right after the great banking crash. I often don’t like regulatory interference. And I didn’t like the banks being forced to suspend dividends in 2020.
But on the whole, the regulatory framework helps make me think that UK banks face some of the best long-term stability in any worlwide market.
Yes, the short term is still very uncertain, despite today’s very low bank share valuations. I mean, we’re looking at a forecast price-to-earnings (P/E) ratio of under five for Barclays. And I never thought I’d see that.
Short-term risk
Bank shares are risky in the short term, for sure. Inflation, interest rates, and economic slowdown are all likely to bring pain in 2023, I think.
That keeps away the fund managers who are scared that this quarter’s performance might look bad. And, as I say, that can be a great time for people like me to load up.
So will I buy? Well, a member of my family just has. And I have Barclays as my next top ISA pick.
