Barclays (LSE: BARC) shares are living the dream right now. After a blistering 2024, they’ve started the new year in style.

It’s been quite a turnaround, after years when FTSE 100 banking stocks were a bit of a nightmare. While they looked cheap, investors needed bags of patience while they waited for the shares to spring back into life. Spring suddenly arrived last February.

The Barclays share price is up 85% in the last year. While it was a good year for the FTSE 100 generally, the index rose a relatively modest 17%. 

Barclays’ outperformance underlines the potential advantages of buying individual stocks over tracking indexes. It helps to pick the right stocks, though.

Can this FTSE 100 bank keep smashing it?

If someone had decided Barclays still had room to grow after last year and invested £20,000 at the start of 2025, they’d be sitting pretty today.

The shares are up 16.85% year to date, which would have increased that £20k to £23,370. Pretty impressive in such a short space of time, if you ask me.

However, nobody should judge the performance of any stock over such a short timeframe. The real advantages of investing are seen over years and decades, as share price growth and reinvested dividends compound and grow over time.

So can Barclays maintain its momentum?

On 13 February, it reported a pretty handy 24% rise in 2024 pre-tax profit to £8.1bn, slightly beating expectations. This allowed Barclays to announce generous shareholder rewards, including a £1bn share buyback programme.

Bizarrely, the shares fell 6% on the day, as investors bemoaned a lack of profit upgrades. What a bunch!

Barclays’ investment banking division has been a significant contributor to profitability, with total income climbing 7% to £11.8bn. The decision to hang onto that after the financial crisis now looks justified.

Analyst sentiment remains positive, but hardly ecstatic. The 17 analysts offering one-year share price forecasts have produced a median target of just over 347p. If correct, that’s an increase of around 11.5% from today. 

While this suggests continued growth, it’s a more modest outlook compared to recent performance.

Recent stellar share price growth has impacted the dividend. The trailing yield is now a modest 2.7%, with forecasts suggesting a rise to 3% this year. 

However, this dividend is expected to be covered 4.6 times by earnings, giving scope for further largesse. And Barclays looks set to deliver.

Shareholder rewards in the pipeline

The board plans to return at least £10bn to shareholders between 2024 and 2026, through dividends and share buybacks, with a continued preference for the latter. 

Despite these positive indicators, potential investors should be mindful of several risks. A slowing UK and global economy could dampen loan demand and increase default rates. Trade tensions could impact Barclays’ international operations, while interest rate cuts may compress net interest margins, affecting profitability. 

Stock market volatility could benefit Barclays’ trading operations, but it also introduces unpredictability.

Despite its strong performance, Barclays’ stock still appears nicely valued. The price-to-earnings (P/E) ratio stands at just 8.65, and the price-to-book (P/B) ratio is just 0.6. 

This suggests it does have further scope for recovery. Barclays shares are well worth considering, in my view. Although at some point, they have to calm down a little.