Barclays: UBS sees improving returns and 23% upside to 580p target Proactive uses images sourced from Shutterstock
UBS reiterated its ‘buy’ rating on Barclays PLC (LSE:BARC) and raised its 12-month price target to 580p from 570p following fourth quarter results.
The shares were trading at 477p (down 1.4%), implying 23% capital upside to the Swiss bank’s revised target.
UBS described the fourth-quarter print as better than expected, with pre-provision profit 4% ahead of consensus and profit before tax 8% higher.
The beat was driven primarily by higher income in the investment bank and the United States consumer bank.
Common equity tier one capital stood at 14.3%, 30 basis points above consensus, or 14.0% after the announced £1 billion buyback.
For 2026, refreshed guidance was broadly in line with market expectations.
Barclays guided to statutory return on tangible equity above 12% in 2026 and above 14% in 2028, compared with 11.3% achieved in 2025.
Return on tangible equity measures net profit as a percentage of tangible shareholder equity and is a key gauge of bank profitability.
Income guidance for 2026 was lifted to around £31 billion from £30 billion previously, with a target of more than 5% compound annual growth to 2028.
UBS noted that roughly half of the expected income growth over the period would be delivered by the structural hedge.
The structural hedge is designed to lock in interest margins on non-interest-bearing deposits by investing them at fixed rates.
Group net interest income excluding the investment bank and head office was guided to more than £13.5 billion in 2026, while Barclays UK net interest income was set at £8.1 billion to £8.3 billion.
UBS’s forecast earnings per share growth of 17% per annum to 2028.
Its revised estimates cut 2026 earnings per share by 4% on higher loan loss assumptions but lifted 2027 and 2028 forecasts by 1% and 4%, respectively.
The bank expected more than £15 billion of total payouts between 2026 and 2028, equivalent to 23% of the current market capitalisation.
On UBS’s forecasts, total distributions could reach £18 billion to £19 billion over the plan period, or 29% of market value, implying a 10% to 12% distributed yield in 2027 and 2028.
Distributed yield combines dividends and share buybacks as a percentage of market capitalisation.
UBS valued Barclays at 7.3 times 2027 earnings per share and 1.1 times tangible net asset value, for a forecast adjusted return on tangible equity of 14% to 15%.
Tangible net asset value represents shareholders’ equity excluding goodwill and other intangible assets.
UBS argued that the shares were priced as though Barclays would fail to deliver on its return targets.