Barclays (LSE: BARC) shares reside the dream proper now. After a blistering 2024, they’ve began the brand new yr in fashion.

It’s been fairly a turnaround, after years when FTSE 100 banking shares have been a little bit of a nightmare. Whereas they seemed low-cost, buyers wanted luggage of endurance whereas they waited for the shares to spring again into life. Spring all of the sudden arrived final February.

The Barclays share price is up 85% within the final yr. Whereas it was a superb yr for the FTSE 100 typically, the index rose a comparatively modest 17%. 

Barclays’ outperformance underlines the potential benefits of shopping for particular person shares over monitoring indexes. It helps to choose the fitting shares, although.

Can this FTSE 100 financial institution preserve smashing it?

If somebody had determined Barclays nonetheless had room to develop after final yr and invested £20,000 at the beginning of 2025, they’d be sitting fairly as we speak.

The shares are up 16.85% yr thus far, which might have elevated that £20k to £23,370. Fairly spectacular in such a brief house of time, should you ask me.

Nonetheless, no person ought to decide the efficiency of any inventory over such a brief timeframe. The true benefits of investing are seen over years and a long time, as share price development and reinvested dividends compound and develop over time.

So can Barclays keep its momentum?

On 13 February, it reported a reasonably helpful 24% rise in 2024 pre-tax revenue to £8.1bn, barely beating expectations. This allowed Barclays to announce beneficiant shareholder rewards, together with a £1bn share buyback programme.

Bizarrely, the shares fell 6% on the day, as buyers bemoaned a scarcity of revenue upgrades. What a bunch!

Barclays’ funding banking division has been a big contributor to profitability, with whole earnings climbing 7% to £11.8bn. The choice to hold onto that after the monetary disaster now seems to be justified.

Analyst sentiment stays constructive, however hardly ecstatic. The 17 analysts providing one-year share price forecasts have produced a median goal of simply over 347p. If appropriate, that’s a rise of round 11.5% from as we speak. 

Whereas this means continued development, it’s a extra modest outlook in comparison with current efficiency.

Current stellar share price development has impacted the dividend. The trailing yield is now a modest 2.7%, with forecasts suggesting an increase to three% this yr. 

Nonetheless, this dividend is anticipated to be coated 4.6 occasions by earnings, giving scope for additional largesse. And Barclays seems to be set to ship.

Shareholder rewards within the pipeline

The board plans to return not less than £10bn to shareholders between 2024 and 2026, by means of dividends and share buybacks, with a continued desire for the latter. 

Regardless of these constructive indicators, potential buyers must be aware of a number of dangers. A slowing UK and international economic system might dampen mortgage demand and enhance default charges. Commerce tensions might influence Barclays’ worldwide operations, whereas rate of interest cuts might compress internet curiosity margins, affecting profitability. 

Inventory market volatility may gain advantage Barclays’ buying and selling operations, however it additionally introduces unpredictability.

Regardless of its sturdy efficiency, Barclays’ inventory nonetheless seems properly valued. The price-to-earnings (P/E) ratio stands at simply 8.65, and the price-to-book (P/B) ratio is simply 0.6. 

This implies it does have additional scope for restoration. Barclays shares are effectively price contemplating, in my opinion. Though sooner or later, they must calm down slightly.