Analysts have reiterated their ‘Buy’ rating on Barclays shares after the lender beat expectations when it reported results earlier this month.
The FTSE 100 lender booked a profit before tax of £8.1bn in 2024, ahead of the £8.07bn estimated.
“We believe strong capital generation should support a higher valuation and plans to return more than £10bn over 2024-26 seem conservative,” said Peel Hunt analysts Robert Sage, Stephen Payne and Stuart Duncan.
Sage, Payne and Duncan said: “The six per cent rise in income, 24 per cent increase in profit before tax and double-digit return on tangible equity confirm that financial performance is stepping up.
“The company guided for structural hedge income to increase a further £1bn in 2025, and market conditions for the investment bank currently appear supportive, especially in the US.”
They added although guidance remained unchanged, the return on 12 per cent return on tangible equity goal appeared “increasingly realistic (if not conservative)”.
Barclays shares slumped as much as five per cent in the fallout of results. However, the stock quickly recovered as analysts branded the dip a “temporary glitch”.
Analysts raise target price
Peel Hunt raised its target price of the bank 11.8 per cent to 359p—the bank floated above 300p on Tuesday morning.
The bank announced a share buyback of up to £1bn during its annual results, which is expected to begin in the first quarter of 2025.
Analysts said: “Share buybacks remain highly accretive not only to Barclays earnings per share but also to its tangible net asset value, to a significantly greater degree than Lloyds and Natwest, and in our view the continued prioritisation of buybacks is beneficial for equity holders.”
They added Barclays maintains a “greater focus on buybacks than its two peers”.
The bank acquired Tesco Bank’s retail banking business in November 2024, which bolstered fourth-quarter income.
The lender enjoyed a £0.6bn day one gain from the takeover, as the group’s UK income rose 9 per cent.
Peel Hunt analysts added: “Barclays never has been an expensive stock.
“As the 2024 results testify, it is now making progress towards its target of an over 12 per cent return on tangible equity in 2026, supported by more rational capital allocation policies and rising structural hedge contributions.”