Key Morningstar Metrics for Barclays
- Fair Value Estimate: GBP 435
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: High
What We Thought of Barclays’ Earnings
Barclays BARC closed 2025 with a return on tangible equity of 8.5% in the fourth quarter but hit its above 11% target for the full year. The bank also announced new targets until 2028, pointing toward further profitability improvements.
Why it matters: Barclays has largely concluded the stabilization of its business by reducing risk-capital exposure to its investment bank on a relative basis and strengthening its retail and corporate banking business in the UK and in the US.
- The bank now focuses on reaping the benefits of its reshaping efforts, building on the cyclical tailwinds from the structural hedge and low credit losses. Greater capital efficiency, a growing wedge between income and costs, and investments in the US business cards business are set to deliver greater midcycle profitability.
- Newly announced 2028 targets of return on tangible equity of above 14% and total shareholder distributions of at least £15 billion between 2026 and 2028 are a strong signal but also rely on perfect execution, in our view.
The bottom line: We raise our fair value estimate to GBX 435 per share from GBX 337 previously. Our no economic moat rating is unchanged. Despite the sizable increase in our fair value estimate, we believe that shares are expensive.
- We now assume a midcycle return on tangible equity of just below 12%, reflecting greater capital efficiency and improving profitability across the group. Our lifted profitability assumptions allow for greater capital distributions, lowering retained equity, driving up returns.
- Our largest changes are in the Barclays UK and US consumer businesses, where we model a more persistent benefit of the structural hedge and higher through-the-cycle profitability from a maturing cards portfolio, respectively.
