Barclays (LSE: BARC) shares have got game as they say across the Atlantic. They’re up almost 75% over the past year and around 250% over five. With a time machine, they’d be a slam-dunk buy. Sadly, there’s no time machine, and every bull run brings risks. So is this still a killer stock today?
Like all the FTSE 100 banks, Barclays has been boosted by several years of higher interest rates, which allows it to widen the gap between what it pays savers and charges borrowers. It’s a slippery trick, but hugely profitable.
Unlike some rivals, Barclays clung on to its US operations during the financial crisis. That now gives it an edge, allowing it to benefit from high-margin businesses such as investment banking and wealth management. It also has more room to expand, particularly in North America and the Middle East, while corporate financial services offer additional, diversified revenue streams.
FTSE 100 growth star
Mostly UK-focused banks like Lloyds Banking Group or NatWest doesn’t have those opportunities. That said, this international reach adds risk too. US regulators can be tough and hand out swingeing fines, something Barclays knows all too well.
The most obvious reason for the share price surge is rapid profit growth. Earnings jumped 23% to £8.1bn in 2024. And Barclays is keen for shareholders to enjoy some of the spoils, with plans to return £10bn between 2024 and 2026, mainly through share buybacks, but dividends too.
Many investors, me included, prefer dividends. I like to see the cash hit my trading account. Buybacks do offer flexibility though, allowing companies to reward shareholders more generously in good years without locking them into payouts they may struggle to sustain. After announcing a surprise £500m buyback in Q3, Barclays is now moving to quarterly buyback announcements. The downside? The trailing dividend yield is just 1.71%.
The board isn’t resting on its laurels either, meeting its £500m gross cost-efficiency savings target for 2025 a full quarter early.
Of course, there are risks. Banking is fiercely competitive, with Barclays facing pressure from global giants and nimble fintech challengers alike. The global economy remains fragile, and any sharp downturn could hurt credit quality and push default rates higher.
This stock is more expensive
The real challenge is sustaining the momentum. The price-to-earnings ratio has crept up to 13.9, although that slides to 11.8 for 2025 and just 9.4 for 2026.
After a strong year for the FTSE 100, broker forecasts seem to have moderated. Barclays is no exception. The consensus one-year price target is just under 523p, implying growth of just over 7% from today’s 492p. That’s a far cry from the gains investors have enjoyed over the past year.
So are Barclays shares still a slam dunk? In the short term, I’d say possibly not. Recent momentum surely has to slow. But for far-sighted investors, my answer is yes, Barclays shares still look worth considering today. The excitement may not come at the same blistering pace, but over the long term, shareholders should see plenty more rewards. And it’s the long term that counts.
