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It has been a superb couple of years for shareholders in Barclays (LSE: BARC). The financial institution share has tripled over the previous 5 years, transferring up 215%. However, actually, somebody who purchased as not too long ago as simply a few years in the past, in January 2024, would even have seen their funding greater than triple in worth. Barclays shares have gone up by 240% throughout that interval.
Regardless of that, the present price-to-earnings ratio is 12, which doesn’t appear particularly excessive.
So, might there be extra highway forward for Barclays shares? And ought I so as to add some to my portfolio?
Banks are a on a roll
Over the previous a number of years, my concern about investing in UK banks has been that the financial outlook has been sluggish, risking a rise in mortgage defaults.
Nevertheless, as shares in Barclays and different banks have demonstrated, thus far such fears haven’t come residence to roost in a method to damage share costs.
Rates of interest have been declining recently however stay markedly greater than they had been a number of years in the past, serving to the banks’ means to earn a living.
As for defaults, Barclays’ most up-to-date quarter confirmed a pointy year-on-year enhance in impairments, from £0.4bn to a nonetheless comfortably manageable £0.6bn. That’s regarding, though the corporate identified that a part of that was a single title cost of £0.1bn.
However, because the storming share value efficiency exhibits, Barclays has been doing effectively. Revenue earlier than tax in the latest quarter alone was over £2bn.
Native and international publicity
London-listed rivals like Lloyds and Natwest are extra firmly targeted on the home market. However Barclays has a leg in each the UK and international camps, due to its giant worldwide funding banking enterprise.
That may assist insulate it to some extent from weak point within the British economic system. Nevertheless, it additionally brings the chance that wider financial issues on the world stage might damage efficiency. With geopolitical danger remaining excessive and key economies displaying restricted progress prospects, that may be a danger for Barclays.
Seen extra positively, although, there’s the prospect of a variety of high-profile inventory market listings this yr each in London and internationally. That might assist revenues and earnings for a big funding financial institution comparable to Barclays.
The occasion might proceed
On that foundation, it’s doable that Barclays shares will proceed to maneuver upwards.
The FTSE 100 financial institution stays solidly worthwhile. For now a minimum of, there isn’t a laborious proof that that’s set to alter any time quickly.
Nonetheless, I stay nervous in regards to the outlook for the UK economic system particularly and international financial progress extra typically.
Barclays sells for beneath ebook worth, providing some cushion to traders – but when an financial storm comes, that ebook worth might effectively be written down.
So, though I see potential for the share to maintain rising, the dangers don’t sit simply with me, so I cannot be investing.
