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Barclays’ (LSE: BARC) share value rose 3.5% yesterday (22 October) following the discharge of its Q3 2025 outcomes.
A key bullish issue was the shock announcement of a £500m share buyback, which tends to help share value positive aspects.
The financial institution added that it’ll now transfer to quarterly share buyback bulletins. The change away from annual or semi-annual bulletins will increase transparency for buyers.
One other constructive ingredient was a steering enhance for 2025’s return on tangible fairness (ROTE) to ‘greater than 11%’, from ‘round 11%’ beforehand. For 2026, it targets a determine of 12%+.
Like return on fairness, ROTE is calculated by dividing the corporate’s internet earnings by common shareholders’ fairness. Nevertheless, ROTE excludes intangible parts reminiscent of goodwill.
Optimistic as nicely was the elevating of its 2025 steering for internet curiosity earnings (NII) to £12.6bn+ from £12.5bn+. NII is the distinction between the cash acquired from loans and paid out on deposits.
A danger to the financial institution is that rising competitors within the sector might cut back its revenue margins.
That stated, whole earnings in Q3 rose 9% yr on yr to £7.167bn. This marked an 11% rise within the first 9 months of this yr over the identical interval final yr — to £22.063bn.
In the meantime, Q3’s revenue after tax dropped 6% to £1.712bn. Nevertheless, over the primary 9 months of this yr, the quantity has risen 12%, to £5.742bn.
How does the price-to-value proposition look?
Regardless of the rise in value in Barclays’ inventory to close 15-year highs, there might nonetheless be loads of worth left in it.
It’s because a share’s value and worth aren’t the identical factor. Worth is regardless of the market is keen to pay at any level. However worth displays the true price of the underlying enterprise.
The hole between the 2 is the place huge, long-term earnings lie, in my expertise. This contains a number of years as a senior funding financial institution dealer and many years as a personal investor.
It’s because any asset’s value tends to converge to its ‘honest worth’ over time, though this isn’t assured.
I’ve discovered one of the best ways to determine this worth is the discounted money movement (DCF) methodology.
It’s because it’s a standalone valuation, in contrast to the comparative ratios in style with some buyers.
These are topic to broad over- or undervaluations of the sector during which a inventory operates. And these can considerably distort the true valuation image of particular person shares.
As a substitute, the DCF pinpoints the value the place any inventory ought to commerce, based mostly on money movement forecasts for the underlying enterprise.
For Barclays, the DCF reveals it’s 49% undervalued at its present £3.81 value.
So, its honest worth is £7.47.
Comparative valuations with its friends verify its current bargain-basement value.
For instance, Barclays’ 8.8 price-to-earnings ratio is backside of its competitor group, which averages 10.9. This contains NatWest at 9, Customary Chartered at 9.4, Lloyds at 12.2, and HSBC at 12.7.
My funding view
I already maintain shares in HSBC and NatWest, so proudly owning one other in the identical sector would unbalance my portfolio.
Nevertheless, I believe Barclays’ robust efficiency over the yr up to now ought to proceed to drive earnings will increase. And it’s finally these that energy any agency’s share value larger over time.
Consequently, I believe the inventory is nicely definitely worth the consideration of different buyers.
