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:
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.

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?

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.

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

Elevated view over city of London skyline
Investing Articles

Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This FTSE 100 share has just crashed another 20%. Its P/E is now just 9.9 so should I buy?

Harvey Jones was tempted to buy this FTSE 100 share after it crashed in October. Now it's crashed again, it…

Read more »

Investing Articles

Could Trump 2.0 be good for FTSE 250 stocks?

Donald Trump’s just been elected President of the United States for a second time. Our writer considers whether this could…

Read more »

Investing Articles

Trading at a 10-year low, this FTSE income stock now yields a chunky 6.99%!

Harvey Jones has been watching from the sidelines as shares in this FTSE 100 income stock just fall and fall.…

Read more »

Dividend Shares

Is a Bank of England rate cut good for the Lloyds share price?

Ken Hall analyses what the latest interest rate cut could mean for the Lloyds share price with the UK bank’s…

Read more »

Investing Articles

2 brilliant bargains I’m considering for my Stocks and Shares ISA!

These FTSE 100 and FTSE 250 shares offer exceptional value on paper. Here's why I'm considering them for my Stocks…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Dividend Shares

How much passive income could I generate with just £10 per day?

Ken Hall wants to create his £10,000 yearly passive income dream by investing just £10 every weekday day in Footsie…

Read more »

Investing Articles

Is the Rolls-Royce share price too high? Here’s what the experts say

The Rolls-Royce share price has surged over two years, representing one of the FTSE 100’s greatest success stories. But is…

Read more »