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 Royal Mail Group 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 Royal Mail Group 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.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

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

6.8% dividend yield! Consider these 2 ‘secret’ passive income stocks to target a £1,360 payday in 2025

Looking for ways to generate above-average dividend income? These lesser-bought income stocks are worth a close look.

Read more »

Elevated view over city of London skyline
Investing Articles

The M&G dividend yields over 10% — and could get higher!

Christopher Ruane explains why he's upbeat about the long-term outlook for the M&G dividend yield and would happily buy the…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

2 popular UK growth stocks I wouldn’t touch with a bargepole in today’s market

Buying growth stocks can deliver market-beating returns, but this FTSE 250 pair doesn't look like a convincing investment for our…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

10 FTSE shares falling today after President Trump’s tariffs bombshell!

Our writer explains why JD Sports Fashion from the FTSE 100 and a diverse bunch of other UK stocks are…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

With value investing back in vogue, I’m taking a leaf out of Warren Buffett’s playbook

With tariffs and trade wars resulting in heightened market volatility, Andrew Mackie takes comfort in Warren Buffett’s words of wisdom.

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Around a 1-year high, is there enough value left in Next’s share price to make it worth me buying?

Next’s share price has risen a lot in eight months, but there could still be a lot of value left…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

OMG DYOR but IMO this ‘cool’ FTSE 100 stock offers bangin’ VFM!

Despite being one of the least trendy 50-somethings around, our writer considers how Gen Z could help push this FTSE…

Read more »

Investing Articles

2 cheap FTSE 100 and FTSE 250 growth stocks to consider as stock markets sink

I think these Footsie and FTSE 250 growth shares could be very shrewd buys to consider in the current climate.…

Read more »