The Barclays (LSE: BARC) share price has been on a tear lately, rising more than 60% over the last 12 months and an eye-popping 200% across five years.
Those are dramatic numbers, especially for a FTSE 100 bank, and they inevitably raise questions about whether the shares can maintain this momentum. But with strong earnings, hefty capital returns and improving investor sentiment, the outlook remains bright.
Slower progress ahead?
Barclays isn’t offering the highest income in the sector. Its trailing dividend yield is just 2.5%, which lags behind FTSE 100 rivals like Lloyds and NatWest, both yielding around 4.5%. HSBC pays 5.6%.
The dividend per share rose a modest 5% to 8.4p in 2024. Analysts reckon it will hit 9.15p this year, then 10.21p in 2026 and 11.82p in 2027. If correct, that gives a projected yield of 3.5% based on today’s 334p share price. That’s still low relative to rivals — the 2027 forecast yield for NatWest is 7.1%.
Management plans to return at least £10bn to shareholders between 2024 and 2026, but with “a continued preference for [share] buybacks”. That won’t appeal to everyone. I prefer to see income land directly in my account, rather than trusting the maths of a shrinking share count. Others may feel differently.
Results keep impressing
On 13 February, it posted a 24% jump in 2024 full-year profit before tax to £8.1bn and returned £3bn to shareholders, including a £1bn buyback.
Its Q1 update, released on 30 April, was just as encouraging. Profit before tax rose 19% to £2.7bn, topping expectations. Credit impairment charges rose to £643m, partly due to uncertainty in the US and the Tesco Bank acquisition. Investment banking revenue impressed, up 16% to £3.9bn, thanks to a 21% rise in fixed income trading.
City analysts are broadly upbeat. Of the 18 offering a one-year rating, 13 say Strong Buy and only one says Sell. The median share price forecast is 369.9p, a gain of just under 11%. Combined with the forecast 2.7% yield for 2025, that would turn a £10,000 stake into around £11,350 over the next year. That’s obviously a much slower return than we’ve recently seen. Given recent success, Barclays was bound to cool at some point.
Risks remain
The UK economy remains fragile, and sticky interest rates could hit credit demand and push up impairments. Barclays is also exposed to the volatile US investment banking market, while any slowdown in global trading could crimp income. Bad loans are creeping up too, with credit charges charges rising as interest rates stay high.
The shares still look attractively valued, with a trailing price-to-earnings ratio of 9.4 and a price-to-book ratio of just 0.70. That could signal a bargain, although banks are generally priced low across the board.
I think Barclays is worth considering today, but with a couple of provisos. First, I wouldn’t expect another 200% jump over the next five years, but I’d still expect decent gains.
Second, I’d personally rather take the higher income on offer from Lloyds (which I already own), HSBC or NatWest. But everyone has their own strategy. I still see plenty of value in all four FTSE 100 banks today.
