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I’d buy Barclays shares today, then hold them for decades

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Barclays (LSE: BARC) shares were on a good run before the Ukraine war. They’d more than doubled in less than two years, but then the Russian tanks rolled in. They now trade 7.24% lower than 12 months ago, and are down 19.85% over five years.

Investing in FTSE 100 banking stocks has been an uphill struggle ever since the financial crisis. Yet hope springs eternal, and investors can’t leave them alone. Given today’s rock bottom valuations, I find them hard to resist.

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Now Barclays faces the prospect of a global recession, with the UK economy particularly vulnerable. As living costs rocket and central bankers put near-zero interest rate policies into reverse, personal and business debt impairments will inevitably rise. That’s especially so if we fall into recession, as seems increasingly likely.

FTSE 100 banks can widen margins

Yet rising interest rates will also allow banks to widen their net interest margins, the difference between what they charge borrowers and pay savers. This offers some respite.

Rising inflation has also boosted the appeal of companies that pay regular dividends, as the big banks now do. Barclays shares currently yield 3.7% and that’s forecast to hit 4.8%. Yet it’s still handsomely covered 3.8 times. I’ll take that.

Value stocks are in fashion, as growth falls out of favour. Barclays shares look dirt-cheap right now, trading at just 4.3 times earnings. Its price-to-book value is a mere 0.4. These numbers all tempt me, as do the bank’s operating margins of 37.2%, even if these are forecast to fall to 31.8% next year.

The big banks remain vulnerable to regulatory punishments. Barclays’ Q1 profits were hit by a whopping £523m litigation and conduct charge, after overselling US securities. This delayed its long-awaited £1bn share buyback for a second time and triggered a 7% drop in pre-tax profits to £2.23bn.

Investors treated this charge as a one-off and focused on the healthy 10% rise in revenues to £6.5bn, as Barclays’ corporate and investment bank benefited from market volatility. With further volatility inevitable, it should continue to do well.

I’d buy dirt-cheap Barclays shares today

The FTSE 100 is turning into a safe-haven stock market. It has fallen less than 5% this year, while the S&P 500 is in bear market territory after falling more than 20%. Barclays shares look more solid than most. As does today’s low entry price.

I don’t want to understate the risks. The UK property market looks vulnerable, which would hit UK-focused banks. With luck, housing shortages may prevent a full-blown crash, but more homeowners are bound to fall into arrears.

Despite the risks, I’d buy Barclays today, rather than wait to see how things pan out. Timing the market is impossible anyway. This is a stock I’d look to hold for a long time. Right now, Barclays shares looks like a great long-term buy-and-hold for my portfolio.

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