Barclays’ share price nears 9-year high after positive Q3 results. What’s the forecast looking ahead?

Barclays came out swinging today with excellent Q3 results. I’m looking to see what it all means for the share price and what kind of returns I can expect.

| 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.

Abstract bull climbing indicators on stock chart

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.

The Barclays (LSE: BARC) share price surged today (24 October) after the bank reported strong third-quarter results, surpassing market expectations. The price rose 4.2% in morning trading, rising above the 246p level – the highest it’s been since 29 October 2015.

Created on TradingView.com

Pre-tax profit came in at £2.2bn for the July to September period, up 18% from £1.9bn in Q3 last year. This exceeded the bank’s own analyst consensus, which eyed a pre-tax profit of ‘only’ £2bn.

The growth was driven by higher revenues and better cost management. In particular, its investment arm led the charge with 6% year-on-year growth to £2.9bn.

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool 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 AstraZeneca made the list?

See the 6 stocks

Net profit was £1.6bn, a 23% increase on the same period last year.

Total income grew by 5% to £6.55bn, with Net Interest Income (NII) for the quarter reaching £2.8bn. The bank also raised its full-year 2024 outlook for NII to over £11bn, reflecting optimism about its core banking operations. 

In the report it reaffirmed its target for a return on tangible equity (RoTE) of more than 10% in the near term, aiming for over 12% by 2026. Additionally, it plans to return at least £10bn to shareholders between 2024 and 2026 through dividends and share buybacks, prioritising the latter.

Looking ahead

Overall, it’s a positive result that could keep the price climbing even further this year. It’s already up 82% since last year’s Q3 results and doesn’t show any signs of slowing down.

But no amount of strong performance can protect it from economic and market risks. Changes in interest rates and inflation, plus economic slowdowns could hurt the bank’s profitability. Foreign exchange risk is another concern as Barclays generates a significant portion of its income from outside the UK. Currency fluctuations, particularly between the pound and the US dollar or euro, can impact its earnings when they’re translated back into local currency.

But for potential investors, key concerns are usually the share price and dividend forecast. What kind of returns should I expect from my Barclays shares going forward?

Created with Highcharts 11.4.3Barclays Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Valuation and forecast

Barclays’ trailing price-to-earnings (P/E) ratio has more than doubled over the past year, rising from 3.6 in October 2023 to 8.7 today. It’s now above the European banks industry average of 7.7 and higher than Lloyds, HSBC and NatWest. That’s not unusual with a rapidly rising price but it could limit growth potential.

Fortunately, with earnings forecast to improve, its forward P/E ratio is a more attractive 6.7.

Looking at analysts’ forecasts, I see an average 12-month target of £2.73, up 14.5% from today. That’s not much to get excited about, as it’s only slightly above the average returns of my index funds. 

Fortunately, the dividend forecast is a bit more promising. 

The current yield of 3.4% is forecast to keep rising, predicted to reach 4.2% by the end of 2026. That would place it nicely above the industry average. Assuming those estimates hold (which they may not), I could expect to see anything from 18% to 22% returns on my shares in the coming years.

Investing in AI: 3 Stocks with Huge Potential!

🤖 Are you fascinated by the potential of AI? 🤖

Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.

If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…

Then you won't want to miss this special report inside Motley Fool Share Advisor – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And today, we're giving you exclusive access to ONE of these top AI stock picks, absolutely free!

Get your free AI stock pick

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.

Mark Hartley has positions in Barclays Plc, HSBC Holdings, and Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, 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

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »