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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 type.
It’s been fairly a turnaround, after years when FTSE 100 banking shares had been a little bit of a nightmare. Whereas they appeared low-cost, buyers wanted luggage of endurance whereas they waited for the shares to spring again into life. Spring abruptly arrived final February.
The Barclays share value is up 85% within the final yr. Whereas it was a great yr for the FTSE 100 usually, 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 proper shares, although.
Can this FTSE 100 financial institution preserve smashing it?
If somebody had determined Barclays nonetheless had room to develop after final yr and invested £20,000 in the beginning of 2025, they’d be sitting fairly right this moment.
The shares are up 16.85% yr to this point, which might have elevated that £20k to £23,370. Fairly spectacular in such a brief area of time, should you ask me.
Nonetheless, no one ought to decide the efficiency of any inventory over such a brief timeframe. The true benefits of investing are seen over years and many years, as share value development and reinvested dividends compound and develop over time.
So can Barclays preserve its momentum?
On 13 February, it reported a fairly helpful 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 buyers bemoaned a scarcity of revenue upgrades. What a bunch!
Barclays’ funding banking division has been a major contributor to profitability, with whole revenue climbing 7% to £11.8bn. The choice to hold onto that after the monetary disaster now seems to be justified.
Analyst sentiment stays constructive, however hardly ecstatic. The 17 analysts providing one-year share value forecasts have produced a median goal of simply over 347p. If appropriate, that’s a rise of round 11.5% from right this moment.
Whereas this means continued development, it’s a extra modest outlook in comparison with latest efficiency.
Current stellar share value development 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 lined 4.6 occasions 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 not 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 constructive indicators, potential buyers must be aware of a number of dangers. A slowing UK and world economic system may dampen mortgage demand and enhance default charges. Commerce tensions may influence Barclays’ worldwide operations, whereas rate of interest cuts might compress web curiosity margins, affecting profitability.
Inventory market volatility may gain advantage Barclays’ buying and selling operations, nevertheless it additionally introduces unpredictability.
Regardless of its robust efficiency, Barclays’ inventory nonetheless seems properly valued. The worth-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 nicely price contemplating, for my part. Though sooner or later, they should settle down a bit.
