Barclays share price to benefit as Q3 M&A deals top $1 trillion

Barclays share price has jumped in the past few months and is hovering at its highest point since 2007. It has soared by over 510% from its lowest level in 2020, and is now hovering near its all-time high of 410p. 

Why the Barclays share price has soared

Barclays stock price has been in a strong bull run in the past few months, mirroring the performance of most European banks.

The closely-watched European bank index has soared by over 60% in the last 12 months. Similarly, in the UK, the biggest banks like Lloyds and NatWest have also surged this year.

The recent surge in European bank stocks like Barclays has been because of the relatively high interest rates that boosted their net interest income.

Banks also benefited from the stable European economy and their cost-cutting measures, including the closure of hundreds of locations. These profits have helped the companies to boost their shareholder returns, including dividends and share buybacks.

In its recent results, Barclays noted that it had realized £200 million of the £500 million gross efficiency savings so far. It spent £1.4 billion in distributions to shareholders in the first half of the year.

Investment banking growth

Barclays has a major catalyst that may boost its performance in the coming months as interest rates start falling: growth in M&A and IPOs.

There are signs that M&A growth and IPOs are starting to happen, which may benefit its investment bank. Data shows that M&A deals have topped $1 trillion in the third quarter alone.

The most recent deal was the leveraged buyout of EA Sports by a group of investors, including Jared Kushner’s Affinity Partners and Silverlake. This $55 billion deal was the highest ever on record.

Data shows that there were 47 deals valued at $10 billion and above in the third quarter, including the $85 billion buyout of Norfolk Southern by Union Pacific, the $50 billion purchase of Teck Resources by Anglo American, and Palo Alto’s purchase of CyberArk.

At the same time, there have been other major corporate activities as companies seek to boost efficiency, including the breakup of companies like Kraft Heinz and Keurig Dr Pepper.

Barclays is a major beneficiary as it is one of the biggest investment banks globally. Data compiled by Dealogic shows that Barclays has advised deals worth $278 billion this year, up from $230 billion in the same period last year.

Barclays has also been involved in the debt capital markets, where it has advised deals worth over $296 billion, up from $288 billion in the same time last year. As a result of all this, its investment banking revenue was $2.28 billion, up from.$2.26 billion.

Barclays stock price analysis 

The daily timeframe chart shows that the Barclays stock price has been in a strong uptrend in the past few months, moving from a low of 222p in April to 380p today.

It has formed an ascending channel and is now slightly above the lower side. Also, the stock has remained above the 50-day Exponential Moving Average.

However, the risk is that the MACD and the Relative Strength Index (RSI) show that the stock has formed a bearish divergence pattern. 

This pattern happens when an asset’s price is rising while the oscillators are falling. It often leads to a strong breakout as the momentum fades.

Therefore, the stock will likely have a strong bearish breakout, potentially to the psychological level at 350p. A move above the year-to-date high of 390p will point to more upside, potentially to the all-time high.

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