Barclays (LSE: BARC) shares have had a bumpy few weeks, as have all the other big FTSE 100 banks. The Iran conflict hit the sector across the board, with Lloyds Banking Group and NatWest Group also slipping. Now all three have staged an impressive rebound. The Barclays share price is up 6.7% over the last week, closely followed by NatWest at 6.5%. Lloyds is up 2.8%.
Sentiment picked up as investors latched onto Donald Trump’s assurances that the situation is contained. Those hoping for a bigger drop and cheaper buying opportunity have been disappointed. So what happens next?
Last week’s recovery doesn’t rule out future volatility. The Middle East remains highly uncertain, and the full force of any energy shock has yet to hit Western economies. Markets may still face a delayed reaction if forecasts prove accurate.
Big FTSE 100 sector
This has been the pattern late. Big shocks such as Covid, Ukraine and US tariffs all triggered sharp sell-offs followed by strong recoveries. Investors who sold in panic weren’t the only ones kicking themselves. So did those who delayed plans to snap up bargain shares, hoping for even bigger falls that never came.
Time in the market matters more than timing it. Barclays is up 55% over the past year and 133% over five. It won’t always do that well, it’s usually better to jump on and enjoy the ride, rather than waiting for the perfect embarkation point.
With that in mind, I’ve been checking out analyst expectations for all three banks and they remain upbeat. The 17 analysts covering Barclays have set a one-year median target of 541p. If correct, that’s almost 24% above today’s 437p. Any dividends sit on top of that. Barclays offers a forward yield of 3.3% for 2026, rising to 3.97% for 2027.
With NatWest, 18 analysts forecast a one-year target of 737p, up almost 19% from today’s 620p. Lloyds is close behind. Analysts forecast 18% growth, from 101p to 119p.
Market risks remain
Forecasts are merely educated guesses, and we could see several more shocks over the next year. An escalation in the Middle East could trigger loan impairments across the sector. Rising interest rates and weaker growth would also squeeze profits. Many are worried about a potential private equity and shadow banking blow-up, which could spill into broader financial markets and splatter the high street banks.
Yet valuations look reasonable. Barclays trades on a price-to-earnings (P/E) ratio of 9.9. NatWest’s P/E is lower at nine, but it has a juicy forecast yield of 5.8%. The Lloyds P/E is higher at 13.3. Its forecast yield is 4.2%.
I think all three are well worth considering with a long-term view. Barclays has a more international exposure and may tempt those happy to take on a bit more risk in the hope of getting superior returns. NatWest and Lloyds have lower-risk profiles, as they focus mainly on the UK economy. Today, I favour NatWest for its lower valuation and higher yield. And I can see plenty more bargains on the FTSE 100 today.
