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When searching for FTSE 100 shares to spend money on, there are a lot of elements to think about. From current outcomes and monetary ratios to administration, developments, and market place, the vary is daunting.
One place I like to begin is by checking current dealer scores. Since main brokers can’t afford to make too many errors, they rent the very best and brightest minds to information their choices.
So when two high US brokers put in constructive scores for Barclays (LSE: BARC), I needed to see what the fuss was about.
Sturdy outcomes
On 18 February 2025, Financial institution of America issued a Purchase ranking for Barclays and JP Morgan reiterated its Obese ranking. Collectively, they replicate rising confidence within the financial institution’s future prospects and a beneficial outlook for the inventory.
The scores comply with a constructive set of FY2024 outcomes launched final week Thursday (13 February 2024).
Most of the outcomes outpaced analysts’ expectations, with pre-tax revenue climbing to £8.1bn — a 24% enhance. The expansion was pushed by robust earnings from its funding banking division and regular rates of interest supporting home lending. The return on tangible fairness (RoTE) stood at 10.5%, assembly the financial institution’s targets.
The financial institution additionally introduced a £1bn share buyback programme, including to £3bn value of capital contributions achieved in 2024.
Up 100% in a yr
The share price has climbed 5% for the reason that report, bringing its 12-month good points to over 100%. Now at round £3 per share, it’s the best it’s been in over 10 years.
Regardless of the expansion, the financial institution’s valuation stays low, with a ahead price-to-earnings (P/E) ratio of seven.27. It is a slight enhance from the determine of 5.72 reported on the finish of 2024. The price-to-sales (P/S) ratio has additionally elevated barely, from 1.24 to 1.29.
Each counsel the share price represents good worth and will have additional room to develop. Nevertheless, if it retains rising and earnings lag behind, it may quickly wander into overbought territory.
Trying on the wider UK banking sector, Barclays is forward of its opponents. The second-closest by way of price efficiency is NatWest, up 96.7% previously yr.
Lloyds and HSBC lag behind, up 46% and 40% respectively. Notably, all 4 banks have comparable P/E ratios.
Dangers and charges
The current development, whereas spectacular, has not come with out sure challenges and issues.
In early February 2025, the financial institution skilled a big IT outage that disrupted on-line and cell banking providers for a number of days. The issue eroded buyer belief and satisfaction and should incur further prices for the financial institution.
These add to the £90m the financial institution has put aside to handle potential compensation claims associated to the now notorious motor financing scandal. This follows a Court docket of Enchantment ruling that expanded the difficulty’s scope.
Barclays’ future efficiency depends on how rates of interest evolve over the subsequent yr or so. Like most banks, it advantages from larger charges that increase web curiosity margins (NIM) whereas protecting deposit charges comparatively low. Nevertheless, if charges begin to fall in 2025 as anticipated, it may squeeze margins and scale back profitability.
Just like the brokers above, I feel it’s a inventory value contemplating. Nevertheless, I’d preserve a detailed eye on UK rate of interest modifications.