What’s going on with Barclays shares?

After seeing Barclays (LSE: BARC) shares go from 136p to 418p over the last three years, I was feeling pretty happy with my stake in the FTSE 100 firm. Even with jitters around a possible windfall tax in the upcoming budget, the Blue Eagle bank looked like a strong part of my portfolio.

Then on 20 October, and seemingly out of nowhere, crisis struck. A Bank of England investigation found possible wrongdoing. Barclays shares were the Footsie’s second-worst performer on the day, a cool couple of billion in market value wiped out in one trading session. Ouch.

So what happened? And is this a signal to sell Barclays shares?

What happened?

Following a whistleblower complaint, the Bank of England looked into possible wrongdoing by Barclays in private credit loans. In simple terms, the fault was putting certain assets in the wrong place – listing them in the trading book rather than the banking book. This had the effect of making profits seem bigger, and making risk seem smaller.

This is not a good look for a company already reeling from similar events. Earlier this year, Barclays took a £200m hit following the collapse of mortgage lender Market Financial Solutions. There were losses after the collapse of subprime lender Tricolor too.

And let’s not forget the 2008 crisis, caused primarily by bankers being lax with their risk-taking. Barclays shares came a cropper during that little episode, dropping 92% between 2007 and 2009.

How much is the overall impact from this Bank of England episode? Not too much. The share price dropped 3.4% on the day, and is up a little since. So this isn’t cataclysmic news so far. Also, it’s worth mentioning this is a Barclays problem, not one of the wider sector. Other FTSE 100 banks are unaffected.

Smooth sailing elsewhere

While this is not an ideal turn of events, I’m happy to see the scrutiny here, especially if it’s being applied before things are getting out of control. The risk is said to be £300m – small potatoes in the grand scheme of things for a £60bn market value company.

Elsewhere, the business is ticking along smoothly. It just reported a 12% rise in earnings, which should offset what’s looking like a windfall tax later this month.

The AI rollout continues apace, with significant job losses as a consequence expected by the end of the year (5,000, or close to 6% of its total workforce). This could lead to efficiency improvements and wider margins. Though letting so many of its employees go and hoping AI will fill in the gap could be a risk as far as I can see – and redundancies have a human and morale cost to think about too.

The price-to-earnings ratio is now just nine with a dividend of 2.74%. Interest rates remaining around the 4% range or higher should boost earnings in the years ahead. Overall? I think the stock is worth considering.

Should you invest £5,000 in Barclays Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barclays Plc made the list?

John Fieldsend owns shares in Barclays.