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2025 is off to a powerful begin for UK buyers. The FTSE 100 index is sitting simply shy of a brand new all-time excessive, beating the document set final Might.
At face worth, that is puzzling. Many specialists are forecasting sluggish development for the UK economic system and borrowing prices are at a 10-year excessive. Authorities spending is underneath the microscope with issues it is going to preserve inflation greater for longer.
Nevertheless, the weaker British foreign money advantages multinationals that earn a lot of their cash within the US, and buyers proceed to pile cash into equities. This has helped preserve UK shares buoyant regardless of the overall doom and gloom.
Amid this turbulent begin to the yr, the UK large-cap index has climbed 5.4% prior to now month to eight,542 factors as I write on Thursday (23 January). And among the many many excessive performers, there’s one FTSE 100 banking inventory that has actually caught my eye.
Robust begin to the yr
The Barclays (LSE: BARC) share worth has gone from energy to energy in latest instances. It has greater than doubled prior to now yr to £2.94 per share as of at the moment. That is critically spectacular development in a brief area of time and it has propelled the corporate’s market cap to over £40bn.
Chief govt CS Venkatakrishnan has confirmed fashionable with buyers since taking the reins in late 2021, with a promise to return £10bn to shareholders through share buybacks and dividends over the following three years.
An 18% enhance in third-quarter 2024 pre-tax income to £2.2bn exceeded analysts expectations with sturdy funding banking efficiency offering a lift. All of that as Venkatakrishnan goals to ship on his promise to scale back the relative measurement of the extra risky buying and selling and funding banking division.
Larger borrowing prices may additionally doubtlessly assist the financial institution because it seems to be to spice up its internet curiosity revenue(NII). That is basically the distinction between the financial institution’s curiosity earned on belongings and curiosity paid to clients. Resilience in financial institution mortgage books alongside greater rates of interest has helped enhance Barclays and different financial institution’s valuations in 2025.
Valuation
So, it’s clear that the Barclays share worth has been on a run these days. How does that evaluate to its UK banking friends?
The NatWest share worth has climbed 95.7% within the final 12 months to £4.18, whereas HSBC shares are up 37% to £8.22 over the identical interval.
That leads me to relative worth. Barclays seems to be good worth at first look with a price-to-book (P/B) ratio of 0.6. That compares favourably to each NatWest and HSBC at 0.9 and 1.0, respectively.
Nevertheless, P/B ratios aren’t the one metric to contemplate. The financial institution’s 2% dividend yield lags behind NatWest’s determine of two.9%, whereas a price-to-earnings (P/E) ratio of 11.8 is nicely above the 8.7 that each NatWest and HSBC are buying and selling at proper now.
Will I contemplate shopping for?
Barclays isn’t a inventory that I’m seeking to purchase proper now. The financial institution’s relative worth to friends is blended and there’s a strategic transformation underneath approach to flip round its profitability.
There’s little question the latest share worth run has been spectacular however I’m undecided it is going to proceed. I’ll be focusing my consideration on extra defensive sectors throughout the Footsie, like prescription drugs, in the meanwhile.