Digital Banking And Fintech Partnerships Will Underpin Future Success

Key Takeaways

• Investments in digital banking, client relationship growth, and acquisitions are boosting efficiency and expanding revenue in high-margin, structurally growing segments.
  
• Strategic cost control, technology upgrades, and business mix improvements are driving consistently higher returns and strengthening long-term earnings quality.
  
• Competitive pressures, regulatory uncertainty, and strategic execution risks threaten Barclays' revenue growth, margin stability, and capital flexibility, especially amid evolving economic and compliance environments.

Catalysts

Provides various financial services in the United Kingdom, Europe, the Americas, Africa, the Middle East, and Asia.

• Ongoing investments in digital banking and technology platforms-including integration of fintech partnerships and sustained client onboarding in corporate banking-are set to drive operational efficiency and expand Barclays' digital revenue streams, supporting stronger net margins and long-term earnings growth.
  
• Broader and deeper client relationships in the Investment Bank, especially among top 100 global clients and through market share gains in FICC and financing, position Barclays to benefit from the continuing globalization of capital markets, which should boost resilient, high-quality fee and trading income.
  
• Continued multi-year deployment of risk-weighted assets into UK businesses (mortgages, business banking, and wealth management) and the recent acquisition of Tesco Bank are expanding Barclays' footprint in higher-margin and structurally growing segments, improving both revenue growth and risk-adjusted returns.
  
• Predictable, multi-year structural hedge income and net interest income momentum, supported by disciplined deposit management, asset repricing and loan growth, will underpin consistent NII growth and support progressive shareholder distributions, enhancing earnings visibility.
  
• Sustained focus on operational leverage-through cost efficiencies, technology investment, and business mix optimization-aims to structurally lower the group's cost-to-income ratio, leading to higher consistent returns on tangible equity and improved overall earnings quality.

Barclays Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Barclays's revenue will grow by 6.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 23.6% today to 24.1% in 3 years time.
• Analysts expect earnings to reach £7.4 billion (and earnings per share of £0.57) by about July 2028, up from £6.1 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as £8.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, down from 8.7x today. This future PE is lower than the current PE for the GB Banks industry at 9.6x.
• Analysts expect the number of shares outstanding to decline by 5.02% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.08%, as per the Simply Wall St company report.

Barclays Future Earnings Per Share Growth

Risks

• Challenges in retaining and growing UK deposit balances amid intense competition and unfavorable pricing dynamics could pressure Barclays' net interest income and margin if deposit migration persists or accelerates, impacting revenue and net margins.
  
• Heightened competition in investment banking, particularly from US banks benefitting from potential regulatory changes (e.g., eSLR relief), may undermine Barclays' recent market share gains in financing, threatening future revenue growth and fee income sustainability.
  
• Large-scale reliance on stable macroeconomic conditions in both the UK and US, despite acknowledged risks of economic slowdown, inflation, or policy uncertainty (e.g., the autumn UK budget), could lead to increased credit impairments or stalling loan and business growth, adversely affecting earnings and capital generation.
  
• Ongoing regulatory reviews in the UK and evolving Basel/CCAR standards imply future uncertainty around capital requirements, ring-fencing, and business model constraints, which might increase compliance costs or limit capital flexibility, thereby impacting profitability and future shareholder distributions.
  
• Execution risk tied to business mix shifts-such as the rapid scaling of high loan-to-value (LTV) mortgages (via Kensington), expansion in US consumer lending (notably through General Motors card receivables), and reliance on efficiency savings-may expose Barclays to higher credit risk, operational risk, and integration costs, all of which could pressure group-wide net margins and earnings consistency over the medium term.

Valuation

• The analysts have a consensus price target of £3.726 for Barclays based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £4.3, and the most bearish reporting a price target of just £2.3.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £30.7 billion, earnings will come to £7.4 billion, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of £3.75, the analyst price target of £3.73 is 0.7% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.