Barclays‘ (LSE:BARC) shares have been on a phenomenal run of late. In 2025 alone, shareholders have enjoyed a near-40% capital gain. And when zooming out to the last five years, the banking giant’s expanded its market-cap by a whopping 270%!
The main driver of this fantastic performance is, of course, higher interest rates. And even as the Bank of England’s been cutting rates, profits have continued to grow. That’s through a combination of financial hedges, higher lending volumes, and superior investment banking performance.
As such, Barclays’ shares are now trading at levels not seen since the 2008 financial crisis. And with the group’s latest results delivering even more impressive earnings, the bank seems perfectly positioned to continue expanding its share buyback and dividend schemes.
So for an investor seeking £1,000 passive income, how many Barclays’ shares do they need to buy in 2025?
Dividend potential
Barclays has a critical role within the British economy. The expectation is that even after cuts, interest rates are unlikely to return to near-zero levels. So Barclays appears to be a reliable source of investment income.
Sadly, with the bank stock enjoying such a strong rally, the higher share price has caused the dividend yield to fall to 2.3%. That’s below the FTSE 100 average of 3.3%. That’s quite a drastic shift compared to the near-5% yield that investors were enjoying back in 2023. To earn £1,000 passively with Barclays shares in 2025, a roughly-£43,500 investment’s needed. That’s 11,710 shares.
Therefore, if earning a stable passive income is the ultimate goal, investing in a low-cost FTSE 100 index fund‘s currently a more effective strategy.
Of course, that’s assuming that Barclays’ dividend stays at current levels. Suppose earnings continue to grow at their current double-digit pace? In that case, management should have little trouble in delivering on its promise to return £10bn of capital back to shareholders. That likely results in significant future dividend hikes that could eventually outperform an index fund.
Risk versus reward
Thanks to its structural hedges, Barclays’ net interest margin isn’t expected to start feeling the main impact of interest rate cuts until as early as 2026.
This is seemingly why, even after such an impressive run, analyst forecasts continue to project further upside. For reference, the latest average consensus points to another 14% gain over the next 12 months. However, even among the bullish analysts, some notable risks have been flagged.
Around 40% of Barclays’ income is dollar-based, resulting in significant exposure to US economic headwinds. Due to the impact and uncertainty of economic and trade policy, softness in the US consumer market is starting to creep in. For Barclays, that means credit impairment charges rising from £34m to £139m year on year in the first half.
This is far from a disaster compared to the £5.2bn in pre-tax profits. But if US economic conditions significantly worsen, Barclays’ high net interest margin may ultimately be offset by rising delinquencies, handicapping growth.
Nevertheless, Barclays’ shares are looking increasingly attractive as a dividend growth opportunity. Therefore, long-term income investors may want to consider taking a closer look, despite the low yield.
