‘Too cheap’ Barclays shares have 20% upside potential

Barclays (LSE:BARC) shares continue to enjoy strong support after three leading City banks this week unveiled post-results price targets that point to further upside of more than 20%.

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UBS is the most positive after yesterday adding another 10p to its estimate at 580p, believing that Barclays has been priced for failure to deliver on its new three-year targets despite good momentum and improved shape.

The Swiss bank’s projection of 17%-a-year earnings per share (EPS) growth leaves the FTSE 100 stock on a multiple of 7.3 times 2027’s forecast earnings, or a 21% discount to the wider sector.

The shares today traded at 473p, below their level on 10 February when Barclays unveiled a three-year plan to return at least £15 billion via dividends and share buybacks.

Barclays also said it was looking to deliver a return on tangible equity (RoTE) greater than 14%, which compared with the City consensus forecast for the key industry measure of 13.5%.

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Bank of America said on Tuesday that the 2025 results met the City’s high bar but that there was still plenty to like about the stock now that the strategy update catalyst has played out.

It highlighted a planned increase in 2026’s dividend to £2 billion and a “confident” fourth-quarter £1 billion buyback, which has lifted the potential cash yield to above the sector average at 17% in 2026/27.

BofA regards the stock as too cheap after improving its price target from 530p to 570p.

Deutsche Bank, which is also at 570p, sees Barclays “progressively improving” up to 2028 but doubts the story stops there.

It said yesterday: “We expect to see a step up in value creation, dividends, and yield in every year, reaching the highest level among all UK banks in 2028.”

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At a multiple of 6.7 times 2028 earnings, the bank said Barclays still screens with significant absolute and relative value as its preferred large-cap UK bank.

Deutsche Bank said its estimates were broadly unchanged post the new business plan, with improving RoTE across all divisions accompanied by the additional benefit of equity reallocation to higher-returning units.

The shares have underperformed an improved FTSE 100 so far this year, although they remain more than 50% higher than a year ago.​​​​​​​

UBS added: “Barclays aims to take its statutory RoTE from 11.3% in 2025 to more than 12% in 2026 and more than 14% in 2027 and is, we think, valued as though it will fail.

“We think the business is showing good momentum with decent loan growth, an improving mix of business in the investment bank and making real progress improving the strategic positioning of the US consumer bank.”

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While UBS retains the view that 'buybacks don't make better banks', it said the recent market volatility around AI concerns underlined the importance of attractive distributed yields for a firm like Barclays.

It said the pledge to return more than £15 billion represents about 22% of market capitalisation but that the bank’s other targets such as RoTE are consistent with total payouts of between £18 billion and £19 billion, or 29% of market value.