Down 23%, are Barclays shares back in the bargain bin?

On Friday, 27 February, the FTSE 100 hit a record high of 10,934.94. That day, my wife and I discussed selling various stocks to take big profits. Alas, UK stocks have since fallen back, with our Barclays (LSE: BARC) shares taking a hefty hit. Are they now too cheap to ignore?

Barclays gets battered

This latest stock-market volatility followed the US attack on Iran since Saturday, 28 February. From end-February, the FTSE 100 has slid 5.2%, while the US S&P 500 index is down 2.8%. Meanwhile, the tech-heavy Nasdaq Composite index has lost just 1.4% in March.

Some Footsie stocks have seen significant slides from their 2026 highs. For example, Barclays stock peaked at 506.4p on 4 February, having been as low as 223.75p as recently as 7 April 2025.

As I write, shares in the Blue Eagle bank stand at 390.65p, down 22.9% from this year’s peak. This values the bank at £53.8bn, making it the 14th-largest business in the FTSE 100.

Despite this setback, the shares have had a strong showing. They are up 32.9% over one year and 114.5% over five. Even better, these gains exclude cash dividends, which have been generous from UK banking stocks.

Value candidate?

Following their latest price slide, Barclays shares trade on 9.2 times trailing earnings, delivering an earnings yield of 10.8%. Their dividend yield has been boosted to 2.2% a year, versus 3.1% a year for the wider Footsie.

Thus, the shares’ cash payout is covered more than 4.9 times by historic earnings. To me, this huge margin of safety suggests that this cash stream is solid, with scope for future increases.

Then again, with war raging in the Middle East once again, is this really a good time to buy shares? I’ll quote legendary banker Baron Rothschild, who once advised, “Buy when there’s blood in the streets, even if the blood is your own.”

Buy, hold, or sell?

For the record, my family portfolio owns Barclays shares, which we bought in mid-2022 for 154.2p a share. To date, we are sitting on a paper gain of 153.3% — one of our best low-risk trades of the last five years. However, we reinvest all of our Barclays dividends into buying more shares. This has turbo-charged our profits, pushing them closer to the 200% mark.

I have no intention of selling our Barclays stake at anywhere near current levels. Indeed, higher oil prices caused by this latest conflict will likely push up UK inflation (the rising cost of living).

If this conflict continues and energy prices stay elevated, this will hinder the Bank of England’s ability to cut its base rate. And higher interest rates means bigger net interest margins for Barclays and other British banks. In other words, as long as borrowers keep paying their mortgages, loans, and credit cards, bank earnings could stay high and stable.

Then again, though I see Barclays shares as under-priced, the bank’s revenues, earnings, and cash flow could suffer were the UK to slide into recession. Economic growth is already sickly and might turn negative as fuel and energy costs soar. Hence, I will hold fire on buying more of this sliding stock until the fog of war clears!

The post Down 23%, are Barclays shares back in the bargain bin? appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Barclays. Cliff D’Arcy has an economic interest in Barclays shares. 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.

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