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Barclays (LSE: BARC) shares have been a terrific investment, rising around 175% over five years. Lately though, things have turned bumpy. They’re down 16% in three months and 10% in the last month alone. Are we staring a buying opportunity in the face?
Barclays shares flew on the back of higher interest rates, healthy investment bank revenues, rising efficiency and a massive programme of share buybacks. Pre-tax profit jumped 13% to £9.1bn in 2025. First-half 2026 profits climbed another 17% to £6.1bn, helped by booming equities trading.
Yet investors are getting nervous. Rising bond yields, fears of an economic slowdown, and potential Budget tax hikes for UK banks have spooked investors. Barclays also faces rising costs, including another £500m of expected second-half expenditure, while loan impairments have increased.
This FTSE 100 stock is returning billions
The shares look terrific value though, trading at a trailing price-to-earnings ratio of exactly 10. The forward P/E is just 8.5, reflecting expectations that earnings will grow over the coming year.
Barclays isn’t just offering share price growth either. It had planned to return at least £10bn to shareholders between 2024 and 2026, through dividends and buybacks. It’s since raised the ambition, targeting more than £15bn of capital distributions between 2026 and 2028.
Buybacks reduce the number of shares in circulation, boosting earnings per share, while dividends put cash directly into investors’ pockets. What’s not to like about that?
The trailing yield has slipped to around 1.95% after the share price rally, but income seekers shouldn’t be too downcast. The forward yield is forecast at 3.4% this year and 4.25% in 2027.
Brokers see more to come
I’ve been checking out broker reports and like me, they’re pretty upbeat. JP Morgan Cazenove sees plenty of scope for Barclays to deliver higher returns, supported by earnings growth, capital distributions and improving efficiency. It raised its price target slightly in September to 620p. Berenberg Bank is also a fan, reiterating its 620p target and Buy rating.
At today’s 444p, this implies almost 40% share price growth, with dividends on top.
It’s not rave reviews all the way, though. Citigroup held its a 500p target and Neutral rating, as it worries about credit losses, costs and the wider economic outlook.
I’m tempted by this UK bank
The outlook is certainly bumpy. Rising bond yields could squeeze borrowers, while a slowing global economy would make life tougher for households and businesses. Barclays shares could easily fall further.
But I think today’s lowly forward valuation makes them worth considering for long-term investors. That P/E is almost down to levels seen before the recent strong run, despite continuing profit growth and hefty shareholder returns. The only thing stopping me today is that I already have outsized exposure to the FTSE 100 banks.
The next month could be choppy, but if Barclays shares dip further, they might become even more tempting. And there are other overlooked growth stocks to consider on the FTSE today…
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Harvey Jones owns shares in Rolls-Royce.
This story originally appeared on Motley Fool
