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2025 is off to a good start for UK investors. He FTSE 100 The index is just shy of a new all-time high, surpassing the record set last May.
At first glance, this is puzzling. Many experts are predicting slow growth for the UK economy and borrowing costs are at their highest level in 10 years. Public spending is under the microscope over concerns it will keep inflation high for longer.
However, the weaker British currency benefits multinationals that make much of their money in the United States, and investors continue to pile money into stocks. This has helped keep UK stocks buoyant despite the general pessimism.
Amid this turbulent start to the year, the UK large cap index has risen 5.4% in the last month to 8,542 points as I write this Thursday (January 23). And among the many high-performing stocks, there's one FTSE 100 banking stock that really caught my eye.
Strong start to the year
He Barclays (LSE: BARC) share price has been going from strength to strength in recent times. It has more than doubled in the last year to £2.94 per share today. This is truly impressive growth in a short space of time and has driven the company's market capitalization to over £40bn.
Chief executive CS Venkatakrishnan has proven popular with investors since taking the reins at the end of 2021, promising to return £10bn to shareholders through share buybacks and dividends over the next three years.
An 18% rise in third-quarter 2024 pre-tax profits to £2.2 billion beat analyst expectations, with strong investment banking performance providing a boost. All this while Venkatakrishnan aims to make good on his promise to reduce the relative size of the more volatile commercial and investment banking division.
Higher borrowing costs could also help the bank as it looks to increase its net interest income (NII). This is essentially the difference between the interest earned by the bank on the assets and the interest paid to customers. The resilience of bank loan portfolios coupled with higher interest rates has helped boost valuations for Barclays and other banks in 2025.
Valuation
So it's clear that the Barclays share price has been rising lately. How does that compare to your UK banking peers?
He NatWest The share price is up 95.7% in the last 12 months to £4.18, while HSBC Shares rose 37% to £8.22 over the same period.
That brings me to relative value. Barclays appears to be good value at first glance, with a price-to-book (P/B) ratio of 0.6. That compares favorably to NatWest and HSBC at 0.9 and 1.0 respectively.
However, P/B ratios are not the only metric to consider. The bank's 2% dividend yield lags NatWest's figure of 2.9%, while a price-to-earnings (P/E) ratio of 11.8 is well above the 8.7 at which it is quoted both NatWest and HSBC at the moment.
Will I consider purchasing?
Barclays is not a stock I'm thinking of buying right now. The bank's relative value versus its peers is mixed and a strategic transformation is underway to improve its profitability.
There's no doubt the recent share price rise has been impressive, but I'm not sure it will continue. For the moment I will focus my attention on more defensive sectors within the Footsie, such as pharmaceuticals.
