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It has been a very good couple of years for shareholders in Barclays (LSE: BARC). The financial institution share has tripled over the previous 5 years, shifting up 215%. However, actually, somebody who purchased as not too long ago as simply a few years in the past, in January 2024, would even have seen their funding greater than triple in worth. Barclays shares have gone up by 240% throughout that interval.
Regardless of that, the present price-to-earnings ratio is 12, which doesn’t appear particularly excessive.
So, may there be extra street forward for Barclays shares? And ought I so as to add some to my portfolio?
Banks are a on a roll
Over the previous a number of years, my concern about investing in UK banks has been that the financial outlook has been sluggish, risking a rise in mortgage defaults.
Nevertheless, as shares in Barclays and different banks have demonstrated, to this point such fears haven’t come dwelling to roost in a approach to damage share costs.
Rates of interest have been declining currently however stay markedly larger than they have been just a few years in the past, serving to the banks’ means to earn a living.
As for defaults, Barclays’ most up-to-date quarter confirmed a pointy year-on-year improve in impairments, from £0.4bn to a nonetheless comfortably manageable £0.6bn. That’s regarding, though the corporate identified that a part of that was a single identify cost of £0.1bn.
However, because the storming share worth efficiency reveals, Barclays has been doing properly. Revenue earlier than tax in the latest quarter alone was over £2bn.
Native and international publicity
London-listed rivals like Lloyds and Natwest are extra firmly targeted on the home market. However Barclays has a leg in each the UK and international camps, due to its massive worldwide funding banking enterprise.
That may assist insulate it to some extent from weak point within the British economic system. Nevertheless, it additionally brings the danger that wider financial issues on the world stage may damage efficiency. With geopolitical danger remaining excessive and key economies exhibiting restricted development prospects, that could be a danger for Barclays.
Seen extra positively, although, there’s the prospect of quite a lot of high-profile inventory market listings this 12 months each in London and internationally. That might assist revenues and earnings for a big funding financial institution akin to Barclays.
The occasion may proceed
On that foundation, it’s potential that Barclays shares will proceed to maneuver upwards.
The FTSE 100 financial institution stays solidly worthwhile. For now at the least, there isn’t a onerous proof that that’s set to alter any time quickly.
Nonetheless, I stay nervous concerning the outlook for the UK economic system particularly and international financial development extra typically.
Barclays sells for beneath e book worth, providing some cushion to traders – but when an financial storm comes, that e book worth may properly be written down.
So, though I see potential for the share to maintain rising, the dangers don’t sit simply with me, so I can’t be investing.
