I was pleased to see an upbeat first-quarter from Lloyds Banking Group Thursday, and Barclays (LSE: BARC) is set to reveal its own quarter figures on Friday. The Barclays share price has beaten Lloyds hands down since the Covid-19 pandemic began, so is it the better bank to buy now?
Since the beginning of 2021, Barclays shares have gained 29% against 25% from Lloyds. The FTSE 100 is up just 8%. But for the bigger picture, we need to look back over 2020. Though both banks crashed about equally hard, Barclays has come back far stronger. Since mid-February last year, the Barclays share price is in positive territory, up 7%. Against that, Lloyds is still down 21%.
The rest of the banks are lagging behind Barclays too. NatWest Group, the other bailed out bank (in its previous guise as Royal Bank of Scotland) is way behind. And even HSBC Holdings is 20% down on pre-pandemic prices. Is Barclays really the best of the sector?
More diversification
Barclays’ wider international exposure must be a part of the market’s preferential support for the Barclays share price. The pandemic might have taken our eyes off it for a while, but Brexit had previously been seen as the big threat. Lloyds’ response, for example, has been to turn to domestic banking and refocus just on the UK. That might turn out well, but it does raise uncertainties. We don’t have a past UK-only Lloyds to compare to, so we’re having to wait to see how it turns out.
Brexit could harm those banks still with European ambitions too. Our exit agreement might allow tariff-free movement of goods, but not services. Barclays earns around half of its revenue here in the UK. The Americas make up by far the second biggest slice, accounting for 34%. There’s little European risk there.
There’s a difference in business sectors too. While the rest of the UK banks have backed away from investment banking following the big crash, Barclays has held on with enthusiasm. Well, HSBC is still in that business too, but it’s not really a UK bank even though it has a listing in London.
Barclays share price support
Profits in investment banking have been rising in the US. So that also appears to underlie a part of the Barclays share price strength in 2021. American banks have been reporting big profits in recent months, and investors will be hoping that Barclays can do the same.
I’m cautious of apparent banking gains in 2021, however. We saw that Lloyds’ first quarter profit was buoyed by the reversal of some of its bad debt provisions. That added a £323m impairment credit to the bottom line, where the first quarter of 2020 saw a £1.4bn provision. The same thing has helped boost US banks in recent months, and I expect to see something similar in Barclays’ Q1 update.
Anyway, after all this, would I buy Barclays today? I might be missing a good opportunity but no, I wouldn’t right now. It’s simply because there are too many uncertainties and I find it too hard to properly judge today’s Barclays share price. But I will keep watching.