The Barclays (LSE: BARC) share price has been going gangbusters. It’s up 42% in the last 12 months, and almost 155% over five years. Can anything stop it?
Barclays shares did retreat in March, along with much of the FTSE 100, due to the Iran war. The conflict still rages, and inflation and higher oil prices remain a live risk, but the stock has bounced back anyway. In one respect, it may benefit. Higher inflation certainly means higher interest rate rates. That allows the big banks to widen net interest margins, the difference between what they pay savers and charge borrowers. The downside is that it could hit mortgage demand and drive up bad debts.
What’s the outlook for this stock?
Barclays faces another threat. It recently suffered a £228m loss from the collapse of Market Financial Solutions (MFS), a UK specialist property lender accused of fraud. It’s responding by curbing riskier lending to the shadow banking and private credit sectors. But that could squeeze future growth.
So what are forecasters predicting for the year ahead? Rather lovely things, as I’ve just discovered.
Seventeen analysts offer one-year share price forecasts, and these produce a median price target of 544p. If correct, that’s an increase of 19.3% from today’s price of 456p. I’m not surprised. Despite their stunning run, Barclays shares trade on a modest trailing price-to-earnings ratio of just 10.5. That’s well below the FTSE 100 average of 16. The forward P/E for 2026 is just 8.8.
So much for growth. What’s the income outlook?
Barclays has committed to distributing more than £15bn of capital to investors between 2026 and 2028. Interestingly, most of that will come in the shape of share buybacks, rather than dividends. Personally, I favour dividends, but that’s me.
Are there hidden risks here?
As a result, Barclays shares have a lower yield than FTSE 100 rivals such as HSBC, Lloyds and NatWest, just 1.9% on a trailing basis. Yet dividend lovers shouldn’t despair. The forward yield for 2026 is 3.3%. Of course, like those growth forecasts, this isn’t guaranteed. But if both growth and dividend forecasts came good, investors would be looking at a total return of 22.5%. That would turn a £10,000 investment into £12,250. For the record, the forecast yield for 2027 is higher still at 4%.
That low P/E is nagging at me. I’d have expected Barclays to be a lot more expensive. In fact, all the banks look pretty cheap. Perhaps investors fear the sector has to slow at some point. Banks are prey to a string of risks right now, including geopolitics, inflation, the AI bubble, shadow banking, windfall taxes and further down the line, falling interest rates.
Maybe they’ll always trade on a discounted P/E given the bewildering range of uncertainties. But I still think Barclays shares are worth considering. I’ve got plenty of exposure to the banks, having bought HSBC and NatWest in the last month. But I’m tempted to buy Barclays shares too.
Should you invest £5,000 in Barclays Plc right now?
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Harvey Jones owns shares in HSBC Holdings, Lloyds Banking Group and NatWest Group
