While reviewing the FTSE 100‘s best performers over one year, I noticed that Barclays (LSE: BARC) shares have soared to third place in this table. Whoa.
Barclays shares surge
The Barclays share price currently stands at 293.45p, valuing the bank at £42.4bn and close to the five-year high of 312.4p set on 12 February. At its 52-week low, it hit 140.48p on 14 February 2024, but has more than doubled since.
Over six months, the shares have leapt 32.4%, while also rocketing 106.6% over one year. They have jumped by 66.8% over five years, thrashing the FTSE 100’s gain of 17.7%. These returns exclude cash dividends, which British banks pay generously. After this price surge, Barclays shares now offer a dividend yield of 2.9% a year, below the Footsie‘s yearly cash yield of 3.6%.
Disclosure: my family bought into Barclays for 154.5p a share in July 2022 and have more than doubled our money since (with dividends included). We have no plans to sell now or in the near future. Why ditch a winning position?
However, I can see a few bumps in the road ahead for Barclays. Here are my five worries for 2025-26:
1. Reducing rates
If UK inflation continues to fall, then the Bank of England can lower its base rate. This generally brings down interest rates, reducing banks’ interest income and lending spreads. This could be Barclays’ biggest risk over the coming years.
2. Mis-selling and loan losses
In its latest results, the bank set aside £90m in the fourth quarter to cover potential fines for mis-selling car finance before it exited this market in 2019. Who knows whether the actual compensation will be lower or higher than this?
Furthermore, Barclays’ latest credit impairments (bad debts and loan losses) totalled £700m, up roughly 17% from Q4 2023. This was higher than analysts forecast, sparking fears that these write-downs could rise further.
3. Money-laundering probe
Barclays warned that the Financial Conduct Authority is reviewing its “historical oversight and management of certain customers with heightened risk“. Again, this might generate hefty fines for misconduct around money laundering and financial crimes.
4. Tax troubles
Barclays is arguing with UK tax authorities over its bank levy, the yearly charge applied to bank balance sheets following the global financial crisis of 2007-09. HMRC want more than Barclays prefers to pay — no surprise!
5. Tech tantrums
Millions of Barclays customers (including me) were affected by a huge IT failure this year. From 31 January to 2 February, balances were not updated and transfers and payments failed as online banking went haywire. This wrecked my weekend with friends, as I struggled to transfer money between accounts.
Following this bungle, Treasury Select Committee MPs have asked major banks and building societies for details of similar outages going back two years. Also, MPs asked Barclays for detailed feedback on its latest stumble, which I suspect won’t end well.
Now for the good news: Barclays’ net profit was around £1bn for the fourth quarter, versus a loss of £111m in Q4 of 2023. Group revenue leapt 24% to £7bn, also ahead of expectations. The bank also saw strong growth in its investment-banking operations. Hence, I see no reason to sell our Barclays shares, but I’ll be watching the group’s announcements closely.
