Up 200% with a P/E beneath 12! Can the Barclays share worth maintain defying gravity?

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The Barclays (LSE: BARC) share worth is a piece of marvel. It’s up 200% over 5 years and 80% within the final 12 months. Proper now it appears unstoppable, leaping one other 7% within the week after the Funds spared the large FTSE 100 banks a brand new windfall tax on earnings. How lengthy can the thrill final?

Given the mighty rally buyers may anticipate Barclays shares to be overpriced, however the price-to-earnings ratio is a modest 11.9, comfortably beneath immediately’s FTSE 100 common of round 17. True, it was solely at six or seven simply a few years in the past, however it’s nonetheless fairly low-cost.

Hovering FTSE 100 sector

The value-to-book sits at roughly 0.78. I bear in mind the times when it was 0.4, however it nonetheless doesn’t look over valued. Traders who’ve missed out on the stellar Barclays rally should have a shopping for alternative. Ought to they take it?

Barclays clung onto its funding banking arm through the monetary disaster, giving it publicity to US markets that rivals don’t have. That provides a little bit of chew within the good instances, however provides a layer of danger in trickier instances. The board appears to be like able to snap up different alternatives Stateside, lately agreeing to purchase US consumer-loan platform Finest Egg for $800m. Good to see it on the acquisition path after years of post-financial disaster retrenchment.

On 22 October, Barclays posted a 7% fall in Q3 revenue to £2bn, principally as a consequence of a better £235m provision referring to the motor finance scandal, taking the entire impairment to £325m. But even right here it obtained fortunate, with far much less publicity than rival Lloyds Banking Group.

The underlying development story appears to be like intact, with Barclays on monitor to file its finest ever 12 months in 2025, with pre-tax prone to beat the £8.4bn it made in 2021, in response to AJ Bell. Barclays additionally stunned and delighted buyers with a $500m share buyback.

Its trailing dividend yield is disappointing at 1.93%, that’s down to 2 elements. First, the shares have achieved so nicely, driving the yield down. Second, the board prefers to reward buyers primarily by way of buybacks. In complete, it plans to return a minimum of £10bn of capital to shareholders between 2024 and 2026, which is fairly beneficiant.

Huge banks are all doing nicely

There are dangers. The UK financial system is struggling whereas the US skirts recession. Slower international development typically may knock its funding banking and company divisions.

Additionally, the large banks have achieved nicely throughout the board recently, boosted by larger inflation and rates of interest. This has elevated their internet curiosity earnings, which measures the distinction between what they pay savers and prices debtors. At Barclays, that is forecast to hit £12.6bn this 12 months.

Nonetheless, the US Federal Reserve and Financial institution of England are each anticipated to chop rates of interest in December, and several other extra instances subsequent 12 months, and that would squeeze margins and earnings. But I nonetheless assume Barclays shares may proceed their climb, albeit at a slower tempo, and are value contemplating immediately.