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Barclays‘ (LSE: BARC) share price has experienced a sharp pullback in recent weeks. Back in September, it was hovering around 390p, yet today it’s near 360p.
Is there an opportunity here for investors? Let’s take a look at what’s going on.
The shares look dirt cheap
At first glance, the shares do look very cheap at present. Looking at the earnings forecast for 2026, Barclays currently trades on a forward-looking price-to-earnings (P/E) ratio of about seven.
That earnings multiple is well below the UK market average (the average FTSE 100 P/E ratio is about 13). It’s also well below the valuations on other major banks such as JP Morgan, Citigroup, and HSBC.
Note that the average analyst price target is 415p. That’s about 15% above the current share price.
Q3 earnings should be strong
Now, Barclays is set to report earnings for the third quarter of 2025 tomorrow. And I reckon they’ll be good.
The reason I’m relatively confident here is that large US banks reported last week, and their earnings were excellent. Investment banking and trading revenues, in particular, were very strong.
For example, Morgan Stanley saw investment banking revenues jump 44% year on year. Meanwhile, Goldman Sachs saw 17% growth in Fixed Income, Currency, and Commodities (FICC) revenue.
Given that Barclays operates in both of these areas, I think its numbers should be decent. Every bank is unique though, so there’s no guarantee that results will be good.
Bad loans in the US
Of course, the big issue in the banking sector right now is bad loans in the US (where Barclays has a lot of exposure). Last week, two US regional banks, Zions Bank and Western Alliance Bank, said that they had been hit by either bad or fraudulent loans, sparking fears of problems in the sector.
In the case of Zions bank, it announced that it would take a $50m loss on two loans. As for Western Alliance Bank, it said it had started a lawsuit alleging fraud.
The problem with issues like this is that when they first appear, it’s often just the tip of the iceberg. As Jamie Dimon, CEO of JP Morgan, said last week: “I probably shouldn’t say this, but when you see one cockroach, there are probably more. Everyone should be forewarned on this one.“
They can also lead to contagion in the banking industry. We saw this in 2023 when the failure of Silicon Valley Bank triggered a loss of confidence that spread to other banks.
Now, in my view, the chances are that Barclays won’t be affected too badly by the current issues. As a Global Systemically Important Bank (GSIB), it’s going to have tighter lending standards than many of the regional banks.
But obviously, there’s some uncertainty here. We can’t rule out some bad loans.
I’m bullish
Overall though, I’m bullish on Barclays shares at current levels. Given its low valuation, I see potential for attractive returns and I think the shares are worth considering for a diversified portfolio.
