If I’d invested £10k in Barclays shares at the start of 2023 here’s how much I’d have today

Barclays shares have been hit by the banking crisis but they now look incredibly cheap, while the forecast yield is too good to ignore.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Person holding magnifying glass over important document, reading the small print

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s been a bumpy year for Barclays (LSE: BARC) shares, which have been rattled by troubles in the US and Europe.

The collapse of Silicon Valley Bank and Credit Suisse inevitably had investors glancing nervously at the FTSE 100 banks, too. Their concern focused largely on Barclays because of its investment banking operations.

Investment banking risk fears

Rivals Lloyds Banking Group and NatWest Group largely pulled out of investment banking after the global financial crisis, to focus on UK personal, private, and business banking.

Barclays stuck doggedly to its investment banking arm, although it trimmed its less profitable Asian operations to focus on the US and UK. These remain controversial, though, with Barclays falling foul of US regulators on a string of occasions. Most recently, it incurred a $361m Securities and Exchange Commission fine for breaching limits on complex financial product sales. 

This contributed to a 14% drop in 2022 profits, made worse by a drop in investment banking fees during last year’s tough market conditions.

Barclays also saw a rise in debt impairment provisions and although it still posted a pre-tax profit of £7bn in 2022, that was down from £8.2bn in 2021.

A decade ago, Barclays shares traded at around 275p. At the time of writing this article, they trade at 147p, a drop of 47% in 10 years. They’re down 4.37% over 12 months, but what about 2023?

Barclays started the year trading at 163.6p, about 16p higher than today. If I had invested £10,000 then, I would have picked up 6,012 shares, which today would be worth £8,951. So I would have lost £1,049, just over 10% of my initial stake. 

By comparison, NatWest shares have dipped just 3% year to date, while Lloyds shares have climbed 1.38%.

Ready for a rebound?

Markets have fought back in recent days, as hopes grow that regulators have successfully prevented contagion. We’ll see. Hidden nasties could still lurk. Barclays has jumped 6.5% in the last week, as investors spot an opportunity. I’m also tempted.

Barclays is now cheaper than Lloyds and NatWest. It has a low price-to-earnings (P/E) valuation of just 4.7, while its price-to-book ratio is just 0.3. The current yield is 5%, covered a healthy 4.2 times by earnings. Its forecast yield is an even juicier 6.4%, and that’s still covered 3.7 times by earnings.

Lloyds trades at 6.45 times earnings and yields 5.02%, so there’s not much between them based on those metrics. NatWest trades at 7.27 times earnings and yields 5.23%. It also looks attractively priced, although not quite as attractive as Barclays.

Buying Barclays shares does involve a bit of risk. There is no guarantee that the banking crisis is over, whatever soothing words we may hear. The company’s shares may look cheap today but investors have been saying that for the last decade, during which time they’ve fallen by almost half.

Yet Barclays has a strong capital base and a healthy Common Equity Tier ratio of 13.9%, and rewards shareholders with a progressive dividend policy and regular buybacks. I recently bought Lloyds, but if I had any spare money to invest in FTSE 100 banking shares today, Barclays would be top of my shopping list.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »