While uncertainty continues to surround the British banking sector regarding motor financing, that hasn’t stopped the Barclays (LSE:BARC) share price from recently rising to its highest point since 2013!
Before the recent tariff-induced sell-off, the stock’s up almost 60% over the last 12 months and 265% over the past five years, with momentum being driven by the benefits of higher interest rates. But with so much growth already under its belt, can Barclays continue to grow its market-cap from here?
Barclays is forecast to grow
Over 80% of institutional analysts currently following this business have either issued a Buy or Outperform recommendation, with no one saying it’s time to sell. And looking at its latest 2024 results, it’s not hard to see why.
Management’s been cleverly making use of derivative strategies to lock up higher interest rates. As a result, the bank’s net interest margin, with the exception of its US arm, has been steadily rising throughout 2024. That’s despite the Bank of England issuing two rate cuts last year.
| Divisional Net Interest Margin | Q4 2023 | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
|---|---|---|---|---|---|
| Barclays UK | 3.07% | 3.09% | 3.22% | 3.34% | 3.53% |
| Barclays UK Corporate Bank | 4.19% | 5.00% | 5.30% | 5.33% | 5.50% |
| Barclays Private Bank and Wealth Management | 5.33% | 5.17% | 5.40% | 5.35% | 5.98% |
| Barclays US Consumer Bank | 10.88% | 11.12% | 10.43% | 10.38% | 10.66% |
| Total (excluding Investment Bank and Head Office) | 4.02% | 4.12% | 4.20% | 4.29% | 4.50% |
Pairing the rising lending rate with a better-than-expected performance from its investment banking division, Barclays enjoyed a 6% boost to its total income, reaching £26.8bn. However, it was the fourth quarter that seemed to have gotten investors excited, with income growing an incredible 24% year on year.
With that in mind, bullish sentiment from analysts makes a lot of sense. The average Barclays share price forecast is 360p over the next 12 months, which is 25% higher than where it’s currently trading.
Taking a step back
The prospect of potentially transforming £1,000 into £1,250 over the next 12 months is undeniably appealing. However, there are some notable headwinds emerging in 2025 that could hamper the bank’s progress.
Across the pond, the US stock market is currently enduring a new wave of volatility driven by economic uncertainty surrounding tariffs and inflation. That could prove problematic for Barclays’ investment banking arm, which benefited from the US stock market rally in the second half of 2024.
Meanwhile, back in the UK, there’s still the question of Barclays’ liability should the ongoing court case into the motor finance scandal end unfavourably. Admittedly, the bank’s exposure is nowhere near as high as that of some of its peers like Lloyds. After all, Barclays stopped issuing motor finance loans in 2019. But, with uncertainty as to the scale of the fallout, even Barclay’s small level of exposure could create short-term disruption to its business and share price. And pairing this with stock market panic surrounding tariffs, it’s investment banking arm could also take a notable hit.
All of this is to say that the operating environment in early 2025 may lead to some disappointments when the bank releases its first set of results for the year. And that’s why I think it’s worth keeping the stock on my watchlist for now.
