When looking for FTSE 100 stocks to invest in, there are many factors to consider. From recent results and financial ratios to management, developments, and market position, the range is daunting.
One place I like to start is by checking recent broker ratings. Since major brokers can’t afford to make too many mistakes, they hire the best and brightest minds to guide their decisions.
So when two top US brokers put in positive ratings for Barclays (LSE: BARC), I had to see what the fuss was about.
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Strong results
On 18 February 2025, Bank of America issued a Buy rating for Barclays and JP Morgan reiterated its Overweight rating. Together, they reflect growing confidence in the bank’s future prospects and a favourable outlook for the stock.
The ratings follow a positive set of FY2024 results released last week Thursday (13 February 2024).
Many of the results outpaced analysts’ expectations, with pre-tax profit climbing to £8.1bn — a 24% increase. The growth was driven by strong income from its investment banking division and steady interest rates supporting domestic lending. The return on tangible equity (RoTE) stood at 10.5%, meeting the bank’s targets.
The bank also announced a £1bn share buyback programme, adding to £3bn worth of capital contributions achieved in 2024.
Up 100% in a year
The share price has climbed 5% since the report, bringing its 12-month gains to over 100%. Now at around £3 per share, it’s the highest it’s been in over 10 years.
Despite the growth, the bank’s valuation remains low, with a forward price-to-earnings (P/E) ratio of 7.27. This is a slight increase from the figure of 5.72 reported at the end of 2024. The price-to-sales (P/S) ratio has also increased slightly, from 1.24 to 1.29.
Both suggest the share price represents good value and could have further room to grow. However, if it keeps rising and earnings lag behind, it could soon wander into overbought territory.
Looking at the wider UK banking sector, Barclays is ahead of its competitors. The second-closest in terms of price performance is NatWest, up 96.7% in the past year.
Lloyds and HSBC lag behind, up 46% and 40% respectively. Notably, all four banks have similar P/E ratios.
Risks and rates
The recent growth, while impressive, has not come without certain challenges and concerns.
In early February 2025, the bank experienced a significant IT outage that disrupted online and mobile banking services for several days. The problem eroded customer trust and satisfaction and may incur additional costs for the bank.
These add to the £90m the bank has set aside to address potential compensation claims related to the now infamous motor financing scandal. This follows a Court of Appeal ruling that expanded the issue’s scope.
Barclays’ future performance is dependent on how interest rates evolve over the next year or so. Like most banks, it benefits from higher rates that boost net interest margins (NIM) while keeping deposit rates relatively low. However, if rates start to fall in 2025 as expected, it could squeeze margins and reduce profitability.
Like the brokers above, I think it’s a stock worth considering. However, I’d keep a close eye on UK interest rate changes.
