Can the sensational Barclays share price do it all over again in 2026?
When I look at Barclaysâ (LSE: BARC) share price performance over the last year, I canât believe my eyes. Itâs up a staggering 80%. That would have turned £10,000 into £18,000, with dividends on top.
Its two-year performance is even more sensational. Itâs up 220% in that time, which would have transformed £10k into £32k, plus dividends. Can it keep up this blistering pace over the next 12 months?
Some say FTSE 100 shares canât match the growth prospects found in the US, that theyâre solid blue-chips with no oomph. Tell it to Barclays. Or HSBC Holdings, Lloyds Banking Group, or NatWest Group, all of which have shown similar levels of growth over the last few years. Again, with dividends on top.
Flying FTSE 100 sector
Sorry to keep banging on about dividends, but over the longer run, a regular flow of shareholder payments compounds total returns beautifully. And with their super-sized profits, banks look good for them.
However, a share price surge like the recent one only comes along from time to time. These things do tend to be cyclical. Banks were out of favour for years after the financial crisis, but lately theyâve been playing an awful lot of catch-up. Barclays is still rattling along nicely, up 25% in the last three months, but now thereâs a whole new year ahead.
The big UK banks got a lift in November when the Chancellor decided against hitting them with an extended windfall tax. But there was potential bad news in December, when the Bank of England cut base rate to 3.75%. Markets expect one or two more cuts next year.
Banks have done well out of higher interest rates, which allow them to widen their net interest margins, the difference between what they pay savers and charge borrowers. In Q3, Barclays posted total income of £7.2bn, and a hefty £3.3bn of that came from net interest.
Falling rates aren’t just a UK thing. They’re falling in the US too, where Barclays has sizeable operations, so margins could be squeezed Stateside too.
Buybacks and dividend income
However, lower rates will also bring some advantages. As the cost-of-living crisis eases, savers will have more cash, and potential house buyers may find they can now afford mortgages. Businesses could benefit too, which should filter through to Barclaysâ bottom line and offset some lost margins.
Lower rates could also boost stock markets, increasing trading activity and supporting investment banking operations. Let’s not get too excited though. The UK economyâs currently shrinking, and there’s talk of a US recession.
Iâd be more worried if Barclays were expensive. With a price-to-earnings ratio of 12.8, itâs not as cheap as before, but it isnât pricey either. The price-to-book ratio remains around 0.84, which isnât toppy.
The trailing dividend is modest at 1.79%, lower than rival banks, but Barclays plans to reward investors mostly through share buybacks. It aims to return at least £10bn of capital to shareholders between 2024 and 2026.
Analysts are wary though. Consensus one-year forecasts produce a median share price target of 474p, roughly where the stock stands today.
So will Barclays repeat last yearâs extraordinary growth? I think that’s very unlikely. But for investors who take a long-term view, as they should, the shares remain well worth considering.
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HSBC Holdings is an advertising partner of Motley Fool Money. Harvey Jones has positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc, HSBC Holdings, and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
