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Barclays (LSE: BARC) shares live the dream proper now. After a blistering 2024, they’ve began the brand new yr in fashion.
It’s been fairly a turnaround, after years when FTSE 100 banking shares have been a little bit of a nightmare. Whereas they appeared low-cost, traders wanted luggage of endurance whereas they waited for the shares to spring again into life. Spring immediately arrived final February.
The Barclays share worth is up 85% within the final yr. Whereas it was a very good yr for the FTSE 100 typically, the index rose a comparatively modest 17%.
Barclays’ outperformance underlines the potential benefits of shopping for particular person shares over monitoring indexes. It helps to select the correct shares, although.
Can this FTSE 100 financial institution hold smashing it?
If somebody had determined Barclays nonetheless had room to develop after final yr and invested £20,000 at the beginning of 2025, they’d be sitting fairly as we speak.
The shares are up 16.85% yr up to now, which might have elevated that £20k to £23,370. Fairly spectacular in such a brief house of time, when you ask me.
Nonetheless, no person ought to choose the efficiency of any inventory over such a brief timeframe. The true benefits of investing are seen over years and many years, as share worth progress and reinvested dividends compound and develop over time.
So can Barclays preserve its momentum?
On 13 February, it reported a reasonably useful 24% rise in 2024 pre-tax revenue to £8.1bn, barely beating expectations. This allowed Barclays to announce beneficiant shareholder rewards, together with a £1bn share buyback programme.
Bizarrely, the shares fell 6% on the day, as traders bemoaned an absence of revenue upgrades. What a bunch!
Barclays’ funding banking division has been a major contributor to profitability, with complete earnings climbing 7% to £11.8bn. The choice to hold onto that after the monetary disaster now seems to be justified.
Analyst sentiment stays optimistic, however hardly ecstatic. The 17 analysts providing one-year share worth forecasts have produced a median goal of simply over 347p. If appropriate, that’s a rise of round 11.5% from as we speak.
Whereas this implies continued progress, it’s a extra modest outlook in comparison with latest efficiency.
Latest stellar share worth progress has impacted the dividend. The trailing yield is now a modest 2.7%, with forecasts suggesting an increase to three% this yr.
Nonetheless, this dividend is anticipated to be coated 4.6 instances by earnings, giving scope for additional largesse. And Barclays seems to be set to ship.
Shareholder rewards within the pipeline
The board plans to return no less than £10bn to shareholders between 2024 and 2026, by way of dividends and share buybacks, with a continued choice for the latter.
Regardless of these optimistic indicators, potential traders ought to be aware of a number of dangers. A slowing UK and international financial system may dampen mortgage demand and enhance default charges. Commerce tensions may influence Barclays’ worldwide operations, whereas rate of interest cuts could compress internet curiosity margins, affecting profitability.
Inventory market volatility may gain advantage Barclays’ buying and selling operations, nevertheless it additionally introduces unpredictability.
Regardless of its sturdy efficiency, Barclays’ inventory nonetheless seems properly valued. The value-to-earnings (P/E) ratio stands at simply 8.65, and the price-to-book (P/B) ratio is simply 0.6.
This implies it does have additional scope for restoration. Barclays shares are effectively value contemplating, in my opinion. Though sooner or later, they should settle down just a little.
