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The Barclays (LSE: BARC) share price has been one of the FTSE 100‘s brightest lights and shows no sign of slowing. It’s up almost 60% over the last year and 270% over five, which is striking when set against a cost-of-living squeeze and weak UK growth.
Ironically, recent higher inflation has helped. It pushed up interest rates and widened net interest margins, the gap between what banks pay savers and charge borrowers.
Barclays also retains a large US investment bank, giving it access to a market that tends to grow faster than the UK. It adds risk but also potential reward. When investors get twitchy, Barclays can fall faster than more cautious UK-focused rivals such as Lloyds, but stronger conditions allow it to pull away.
Top FTSE 100 performer
The real reason Barclays has done so well is that it makes bags of money, and shares it around. In full-year 2024 pre-tax earnings jumped 24% to £8.1bn and group return on tangible equity (RoTE) hit 10.5%. The bank returned £3bn to shareholders, including a £1bn share buyback and a 5.5p full-year dividend.
2025 has delivered more of the same. Third-quarter income climbed 11% to £7.2bn, while group RoTE for the first nine months of the financial year hit 12.3%.
Barclays has also been busy expanding. It bought Tesco’s retail banking business last year. In October it secured a Saudi investment-banking licence and agreed to pay $800m for US personal loan platform Best Egg. This can also bring risk of course. Acquisitions don’t always work.
The bank has largely ducked the motor-finance mis-selling storm, which hit Lloyds hard. If that wasn’t enough, it now seems unlikely that banks will face a windfall tax in the coming Budget (although nothing is confirmed yet).
Growth, buybacks, and dividends
Markets are jittery about a possible AI-driven bubble. Any correction or crash would almost certainly hit Barclays. Yet the shares climbed a further 7.5% over the last month. With a price-to-earnings ratio of 11.4, the stock still looks reasonable. What’s not to like?
The trailing dividend yield is low at 2.1%. That’s partly because the share price has run ahead of itself, but also because the board prefers buybacks as a way of rewarding shareholders.
The Bank of England held interest rates at 4% yesterday (6 November) but markets now expect a cut at the 18 December meeting, with more likely next year. Cheaper money may narrow net interest margins. It might also lift the UK housing market though, driving mortgage activity.
Long-term case compelling
No big bank is ever completely free of risk. A regulatory scandal or stock market swing could hit Barclays shares at any time. If we get an AI crash, all bets are off. Yet the numbers look solid, the strategy is clear and the business has left the 2008 crisis firm in the rearview mirror. Let’s just hope the big banks don’t ramp up the risk level, as memories fade.
I think Barclays is well worth considering, although it shares most surely slow from here. If concerned, investors could feed money into the stock little by little, taking advantage of any dips. Its rampant run can’t last forever, but its long-term potential still looks solid to me.
