Over the long term, Barclays‘ (LSE:BARC) shares haven’t exactly been a phenomenal investment. In fact, over the last 20 years, even with dividends, the banking giant’s only generated a 34% return – an average of 1.5% a year.
This perfectly demonstrates the challenge banks have operating in a near-zero-percent interest rate environment. However, with interest rates rising again, this story’s shifted dramatically in 2025.
Since the start of the year, Barclays’ shares have jumped more than 50%. And for those reinvesting dividends, the gain’s an even more impressive 54%. To put this into perspective, a £5,000 investment in January is now worth £7,700.
So the question now is, will it happen again in 2026?
What the experts are saying
Despite the strong growth delivered in 2025, the consensus among institutional analysts remains overwhelmingly bullish, with 15 out of 18 experts issuing a Buy or Outperform rating. Among the most bullish is JP Morgan with a 525p share price target.
Forecasts are not guarantees. But assuming this projection’s accurate, that implies Barclays’ shareholders could enjoy another 28.5% capital gain over the next 12 months. And when paired with the stock’s current 2.1% dividend yield, that’s enough to turn £5,000 today into £6,530.
Is this a realistic expectation? Looking at JP Morgan’s investment case, there’s a lot to be excited about. Unlike most other large British banks, Barclays has very limited exposure to the ongoing motor financing scandal. At the same time, it benefits from a more diversified income stream thanks to its expansive investment banking arm.
Interest rate cuts from the Bank of England are also proving to be non-disruptive. Thanks to some clever hedging strategies, Barclays is set to continue enjoying wider lending margins over the near term. And with this excess cash flow being funnelled into dividends and buybacks, Barclays’ shares could indeed enjoy continued momentum.
What could go wrong?
Even bullish institutional investors have identified several key risks surrounding this business beyond the medium-to-long-term headwind of interest rate cuts.
Barclays has notable exposure to the US consumer credit market. And with tariffs seemingly starting to take an economic toll, combined with the rising wave of job eliminations due to AI, default rates are on the rise. The UK has a similar problem where the prolonged weak economic environment is causing record levels of bankruptcies among smaller businesses.
So far, Barclays seems to be managing its loan book well. But a sudden drop or deterioration in credit quality could ultimately offset the gains earned through wider lending margins.
Put simply, Barclays is heavily exposed to macroeconomic risks that could compromise future growth. And it’s why some experts like Deutsche Bank and Citigroup have put their share price targets closer to 400p – roughly where Barclays shares trade today.
The bottom line
Despite the risks surrounding this business, I nonetheless remain cautiously optimistic. Management’s demonstrated a remarkable talent for outmanoeuvring its competitors in recent years. And while past performance is a poor indicator of future results, management teams with solid track records in execution are often worth watching closely.
That’s why I think Barclays’ shares are worthy of closer inspection. And it’s not the only stock within the financial services space that I’ve got my eye on right now.
