Up 70% This Year, What’s New With Barclays Stock?

Barclays stock (NYSE: BCS) has gained about 70% year-to-date, as compared to the 25% rise in the S&P500 over the same period. In contrast, Barclays’ peer Bank of America (NYSE: BAC) is up 35% year-to-date. So what are some of the factors that have driven the stock higher of late?

Earlier this year, Barclays announced a strategic overhaul aimed at stabilizing its operations and improving profitability. The bank has shifted its focus toward expanding its domestic lending business in the U.K, including mortgage lending and personal loans, which offer greater stability. At the same time, it has been reducing costs in its more volatile investment banking segment. The company also bought Tesco Bank in a deal that was closed in early November in a move that bolsters Barclays’ retail banking presence in the UK. Barclays is also targeting over £2 billion ($2.5 billion) in gross cost savings and aims to improve its Return on Tangible Equity to over 12% by 2026, up from about 9% in 2023. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Barclays posted better-than-expected Q3 results. Net profits attributable to shareholders stood at £1.6 billion (about $2 billion), while Barclays’ revenues for the period rose 5% year-over-year to £6.5 billion. Growth was driven by the company’s investment banking business – which has considerable exposure to the U.S. market – fared well, led by renewed deal making activity as well as higher volatility in the stock markets, which boosted fee revenues. The bank is also seeing higher-than-expected net interest income – essentially the difference between the interest earned on loans and what they pay on deposits. Barclays raised its NII guidance for 2024 to £6.5 billion ($8.16 billion), up from £6.3 billion previously. This improvement is driven by slower-than-expected rate cuts in the UK and structural hedges that the company previously took on to mitigate the impact of falling interest rates.

The increase in BCS stock over the last 4-year period has been far from consistent and has largely been as volatile as the S&P 500. Returns for the stock were 32% in 2021, -22% in 2022, and 6% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

We value Barclay’s stock at about $12 per share which is slightly below the current market price. See our analysis of Barclays’ valuation for a closer look at what’s driving our price estimate.

[1] Returns as of 12/24/2024
[2] Cumulative total returns since the end of 2016

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