With a rise of a shade under 80% in 2024, the Barclays (LSE: BARC) share price has only fallen short of this year’s winning bank by a fraction.
NatWest Group just edged it out. Or at least, it has done with a few market days left before the year ends. So maybe there’s still time for change.
International strength
One thing I think could propel Barclays to the winning position in 2025 is, perhaps ironically, also something I see as one of its key risks.
At Q3 time, the company told us that Barclays Investment Bank “has a diverse income profile across businesses and geographies including a significant presence in the US.” That arm of the business contributed £3,303m in profit before tax in the first nine months of the year.
Global corporate and investment banking has been known to go a bit wrong in the past. And after the financial crisis, Barclays was the only UK bank that really stuck with it.
It could go wrong again. But in the first year of the new US administration, with President-elect Trump seemingly more likely to loosen banking regulation than tighten anything? I reckon Barclays could get a boost that its UK high street competitors will miss.
Latest scandal
I can’t look at any UK bank without thinking about the current car loan mis-selling probe. It affects Barclays, which has been in the news in recent days.
The bank had appealed a ruling by the Financial Ombudsman Service that it had failed to treat a car loan customer fairly. But a judge has dismissed the appeal.
Some observers suggest the total hit to the banks could reach £38bn.
But at least Barclays’ expected share of it looks relatively low right now. Estimates suggest its provisions should be well below Lloyds Banking Group‘s, for example. So it’s not a good thing, but it might be relatively not as bad.
Cash flowing
The Barclays share price has surely been helped by the bank’s approach to rewarding shareholders with cash. We’re only looking at a forecast 3.1% dividend yield for this year, though forecasts show it rising in the next few years.
But I think Barclays’ big winner is its aggressive share buyback strategy. At the end of the last full year, the bank said it plans to “return at least £10bn of capital to shareholders between 2024 and 2026, through dividends and share buybacks, with a continued preference for buybacks“.
That’s worth more than a quarter of Barclays’ total market-cap. As well as any per-share improvements that buybacks can generate, it surely has to boost investor sentiment too.
Valuation
I just noticed something else. Looking at forecasts out to 2026, the Barclays price-to-earnings (P/E) ratio’s estimated at just 5.5 by then. That’s firmly below Lloyds, NatWest and HSBC Holdings.
International uncertainty, mis-selling, a dodgy economic outlook… they all mean risks for banks in 2025. But I think investors with a long-term vision might consider them worth taking.
