£5,000 invested in Barclays shares 3 years ago is now worth…
Barclays (LSE:BARC) shares are up 42.1% over three years. As such, a £5,000 investment three years ago would now be worth around £7,100, plus dividends, which would have amounted to around £900. All in all, itâs a pretty strong investment.
However, this three-year growth figure belies the ups and downs of recent years. After several years of underperformance the stock took off in early 2024 as a strategic shift complemented an improving outlook for UK banks.
A brief overview
Barclaysâ share price saw declines in 2022 and 2023 due to a combination of macroeconomic and sector-specific challenges. Higher interest rates initially boosted net interest margins and made banks more profitably but also raised concerns over loan defaults, weighing on sentiment. And in early 2023, the collapse of Silicon Valley Bank (SVB) triggered broader banking sector fears, exacerbating the sell-off.
The SVB fiasco was, in the end, something of a contained event. The tech-focused bank had very unique circumstances that led to its downfall. However, as fears of contagion took hold, Barclays’ stock plummeted and, according to my March 2023 article, was trading at just 4.5 times earnings. For me, it was a clear buying opportunity.
By 2024, Barclays began to recover as a strategic shift â focusing on cost-cutting, reallocating capital, and business streamlining â boosted investor confidence. Improving sentiment towards banks, driven by falling interest rates, further supported the stockâs rebound.
A renaissance for British banks
Barclays’ shares have surged to a decade high, reflecting what could be seen as a renaissance for UK banks. Moderating yet elevated interest rates present a supportive trend, boosting net interest income while reducing pressure on loan defaults â a dynamic unseen since the early 2010s.
The Bank of England’s pro-growth regulatory reforms and anticipated rate cuts below 4% in late 2025 further support profitability, with Barclays forecasting £30bn total income by 2026 through strategic hedging and fee-based revenue shifts.
Brexit-related uncertainties have eased, and while UK GDP growth remains modest at 1.2% for 2025, stable consumption and excess household savings provide a resilient backdrop. Barclays’ strategic pivot â divesting its German consumer arm and the acquisition of Tesco Bank â sharpens its domestic focus. This reallocates risk-weighted assets to capitalise on this ‘Goldilocks’ rate environment.
Meanwhile, potential Trump-era market volatility could buoy investment banking revenues â this arm has underperformed in recent years â leveraging Barclays’ diversified global operations.
Itâs worthy of consideration
Investors can often dismiss stocks when theyâre trading at decade highs. And I can see why they would do the same here. Over the last two decades, banks havenât delivered the desired growth. After a rally, investors may be keen to take profits and Iâd suggest that sentiment towards banks is still somewhat uncertain. An uptick in inflation, for example, may derail some of the recent progress.
However, with analysts pointing to a 26% discount to fair value â around £3.90 â and with a price-to-book ratio of 0.6, itâs certainly a stock for investors to ponder. Iâd consider buying more myself if it wasnât already well represented in my portfolio.
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James Fox has positions in Barclays Plc. The Motley Fool UK has recommended Barclays 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.
