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With the UK Supreme Court ruling in favour of motor finance lenders, bank stocks have largely rallied over the last week, yet Barclays (LSE:BARC) shares have seemingly missed out.
While stocks like Close Brothers and Lloyds jumped by double-digits on the announcement, the reaction from Barclays investors seems to have been fairly muted. And that’s not entirely surprising given the bank had relatively little exposure to the finance mis-selling scandal to begin with.
In fact, it’s why Barclays shares have vastly outperformed both Lloyds and Close Brothers over the last 12 months, climbing by 69% versus 14% and 41%, respectively.
As such, anyone who bought £5,000 worth of Barclays shares before the announcement now has just shy of £5k due to minor daily volatility. But could there still be growth potential for long-term investors?
Exploring growth opportunities
Even after enjoying a solid winning streak, analysts continue to be bullish on Barclays shares. For example, the analysts at RBC Capital Markets recently raised their 12-month share price target from 355p to 435p following the bank’s latest results.
Thanks to a combination of double-digit pre-tax earnings growth, a 13.2% return on tangible equity, and 10% revenue boost from the investment banking arm, Barclays seems to be delivering on growth expectations. And when paired with the group’s robust net interest rate margins supported by clever financial hedging, the group appears well positioned to offset the incoming headwind of interest rate cuts.
Combining all this with operational efficiency improvements and disciplined capital allocation, it’s easy to see why institutional investors like RBC are bullish. And if their projections prove to be accurate, last week’s £5,000 investment could grow to £5,916 by this time next year – a solid 18.3% return on investment.
What could go wrong?
Despite being bullish, even institutional investors recognise that Barclays shares aren’t guaranteed to maintain their upward trajectory.
With exposure to the US consumer market, broader US economic uncertainty could start to creep into the bank’s financial results. And that could translate into near-term volatility and pressure on profits. This is problematic in a number of ways. And even RBC has warned of a potential valuation compression.
Despite hiking its share price target, RBC expects the price-to-earnings ratio to get squeezed closer towards 6.4 in 2026. That means, its elevated valuation target is dependent on Barclays expanding its bottom line from around 49p per share to 68p – a 39% increase.
While optimistic, this level of growth isn’t in the realm of fantasy, considering profits grew by 41% across the first half of 2025. And with Barclays recently launching a new £1bn buyback programme, the number of shares outstanding is on track to fall, giving an automatic boost to earnings per share.
Of course, forecasts aren’t guaranteed. And if US banking performance does indeed suffer, Barclays could struggle to meet the required earnings targets even with the helping hand of a buyback scheme.
The bottom line
Barclays shares continue to show promise even after enjoying strong price momentum. The bank stock is far from risk-free. But for investors seeking exposure to the financial sector, Barclays could be a good place to start looking.
