Barclays (LSE:BARC) shares are currently (1 June) changing hands for around a tenth less than they were at the start of February. And over the past three months, the bank’s share price performance has been distinctly average. Of all the stocks on the FTSE 100, it ranks at number 50 over this period.
But it’s the future that really matters. With this in mind, is the pullback in the share price a golden opportunity to research further? Let’s see.
Underappreciated and undervalued?
Looking at the league table of price-to-earnings ratios of Britain’s five biggest banks, Barclays languishes second bottom.
Based on its price-to-book (P/B) ratio, it looks to be the FTSE 100’s cheapest bank. In fact, it’s the only bank with a P/B below one. In theory, this means the sum of its parts (assets less liabilities) is higher than its current market cap.
I suspect some of this can be put down to its business model. It generates a significant proportion of its income from its investment arm. Here, earnings can be erratic due to the unpredictable nature of the stock market. Also, the return on tangible equity (RoTE) is lower.
Generally speaking, investors place a higher multiple on more stable earnings. I reckon that’s why Lloyds Banking Group, with its large mortgage book and focus on high street banking, is valued more highly.
Going in the right direction
However, for the time being, let’s ignore how Barclays is valued relative to others and look at its own performance over the past two years. Encouragingly, this shows an improving trend, both in terms of income and profit.
In 2025, the bank met all of its key financial targets. Notably, year-on-year earnings per share increased by 21.6%.
And it achieved a RoTE of 11.3% compared to 10.5% in 2024. This gave the bank’s directors the confidence to announce a 2028 RoTE target of “greater than 14%”. They’ve also unveiled plans for 2026–2028 shareholder distributions (dividends and buybacks) of £15bn.
Barclays reckons cost savings achieved through the widespread adoption of artificial intelligence solutions are going to be a major driver of the anticipated future increased profitability.
Despite such an impressive performance, one area to keep an eye on is the level of loan defaults. Barclays set aside £823m to cover potential losses during the first quarter of 2026. This was 54% more than for the previous quarter. It’s a reminder that it’s vulnerable to a wider economic slowdown, particular in the UK and US where it does the majority of its business.
Even so, analysts have a 12-month price target that’s 20% higher than the current share price. And of the 18 covering the stock, none are advising their clients to sell.
Final thoughts
I already own shares in Barclays. In fact, it’s the only UK bank that I hold. But I wouldn’t describe the stock as being in bargain territory. In my opinion, there are plenty of other FTSE 100 stocks offering better value. Instead, I would describe the bank’s shares as being moderately undervalued.
That means investors looking for an entry point into the sector at a price that’s notably lower than just before the war in the Middle East started, could consider adding the stock to their own portfolios.
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James Beard owns shares of Barclays.
