Barclays (LSE: BARC) shares made a behavior of outpacing the FTSE 100 final yr, and so they’ve simply finished it once more.

During the last 12 months, the Barclays share price has skyrocketed 111%. Solely British Airways proprietor IAG has finished higher.

Sooner or later, the momentum has to stall. However not but. The inventory has jumped one other 15% within the final month. The FTSE 100 has finished nicely in that point, rising 5.45%. But Barclays delivered nearly triple the return.

Can this winner proceed to fly?

If an investor had put £10,000 in Barclays shares a month in the past, they’d now have round £11,500. That’s a reasonably stable return for a financial institution many had written off as a serial underperformer. So what’s been driving it?

February 2024 marked a turning level when CEO CS Venkatakrishnan launched an formidable strategic overhaul, making the high-performing UK retail division the point of interest of his development technique.

He additionally snapped up Tesco’s banking arm for £600m and launched a £2bn effectivity drive. Traders woke up.

FTSE banks have additionally benefitted from increased pursuits charges. These permit them to widen web curiosity margins, the distinction between what they cost debtors and pay savers.

That profit was anticipated to reverse final yr, with the Financial institution of England (BoE) anticipated to chop base charges 5 or 6 occasions in 2024. As a substitute, we acquired only a couple.

This allowed the banks to unwind their rate of interest hedges in a measured method. Final yr most likely handed Barclays the perfect of all attainable worlds. Particularly because it largely bypassed the motor finance mis-selling scandal.

Can its luck proceed? I’m cautious. The UK financial system seems to be sticky to me. A recession can’t be dominated out. That might power the BoE to chop charges sooner than presently anticipated, squeezing margins.

On the plus facet, decrease rates of interest ought to revive the housing market, pushing up demand for mortgages.

Barclays shares nonetheless look respectable worth. The price-to-earnings ratio has climbed from round seven occasions earnings to nearly 12 occasions. That’s an enormous soar. However with earnings per share forecast to develop 12.8%, it’s not extreme. The price-to-book ratio stays a modest 0.6, suggesting the valuation remains to be grounded in actuality.

Good worth, respectable yield

One other draw back of the rally is that Barclays’ dividend yield has fallen to 2.6%, though that’s anticipated to nudge up to three% over the subsequent yr. It’s lined 4.5 occasions by earnings, so be careful for additional shareholder rewards.

Barclays is a FTSE rarity because it has maintained its funding banking facet. With Donald Trump within the saddle, volatility seems to be to be baked in. That might enhance exercise and charges.

The 18 analysts providing one-year share price forecasts have produced a median goal of simply over 322p. That’s a rise of slightly below 6%. Mixed with the anticipated dividend yield, this could ship a complete return of underneath 10% if true. After the latest surge, a interval of consolidation may be on the playing cards. This can be one to think about in the meanwhile however maybe not for anybody looking for a repeat of its outperformance.