Barclays PLC shares rose 2.75% to 487p on Wednesday, benefiting from the support of analysts at two rival banks, with both feeling the lender is in better shape than its valuation suggests, with improving returns and scope for higher payouts.
Deutsche Bank's Robert Noble sees the blue eagle bank progressively improving to 2028 "and we doubt the story stops there", forecasting rising return on tangible equity each year and calling it his preferred large-cap UK bank.
On Noble's numbers, the shares trade on 6.7 times 2028 earnings, offering “significant absolute and relative value”, with revenue growth of about 5% a year underpinned by structural hedge repricing and balance sheet expansion.
"Barclays' [return on table equity] improves every year through 2028. On our forecasts, all divisions should see improving ROTE, with Barclays additionally benefiting from equity reallocation to higher-returning units," he said.
UBS's Jason Napier also struck an upbeat tone after last week's fourth-quarter beat, when profit before tax 8% were ahead of expectations.
While the refreshed 2028 targets, including ROTE above 14%, are “probably what most investors hoped for”, the shares are “priced for failure to deliver”, he said.
As well as earnings per share expected to grow around 17% a year to 2028, total shareholder payouts of £18 billion to £19 billion are pencilled in too, equivalent to about 29% of the bank’s market value.
On UBS forecasts, the shares trade for 7.3 times 2027 earnings, which Napier said suggests Barclays should be able to deliver both growth and a 10% to 12% distributed yield, lifting his price target to 580p.