Will Barclays Share Price Outperform Lloyds by 2026?
The share price performance of Barclays and Lloyds Banking Group has drawn attention as both banks achieved impressive gains in 2025. Barclays’ share price climbed 77% during the year, while Lloyds experienced a slightly higher surge of 79%. As we look forward to 2026, investors are questioning which stock may outperform the other.
Interest Rate Impacts on Banking Shares
The significant climb in share prices for both banks can largely be attributed to the rising interest rates, which improved their net interest margins. This margin represents the difference between interest paid to savers and charged to borrowers.
However, with the Bank of England and the US Federal Reserve forecasting interest rate cuts starting in December 2025, scrutiny over future margins intensifies. These anticipated reductions may pressure the margins for both Barclays and Lloyds in the upcoming year.
Performance Comparison Between Barclays and Lloyds
Examining the performance over a two-year period reveals that Barclays shares have increased by an impressive 205%. This is almost double the 104% rise recorded by Lloyds. Barclays benefited from avoiding the motor finance scandal that affected the latter through its Black Horse division.
Valuation and P/E Ratios
As of now, both banking stocks are facing different valuations. In 2023, shares for both banks were trading at a price-to-earnings (P/E) ratio of around six or seven. Presently, Barclays shows a P/E of 13, while Lloyds stands at a higher ratio of 15.4.
- Barclays price-to-book ratio: 0.85
- Lloyds price-to-book ratio: 1.25
These figures suggest that Barclays may present slightly better relative value, but potential gains are not guaranteed.
Return on Tangible Equity (RoTE)
A pivotal metric for analyzing bank performance is the return on tangible equity (RoTE). Analysts predict Lloyds will maintain a RoTE exceeding 15% in 2026, supported by its UK-focused retail banking model. Conversely, Barclays is expected to achieve a RoTE just under 13%, backed by its diversified business that includes US investment banking.
Stock Price Predictions
Analyst consensus estimates place the one-year share price target for Barclays at just under 474p, marginally lower than its current trading price. For Lloyds, the predicted target is around 101p, indicating a 2.6% increase from current levels. This cooling of growth expectations follows a robust performance in prior years.
Dividend Yields
For income-focused investors, Barclays offers a lower yield estimated at 1.94%, with management favoring share buybacks as a means of returning capital. In contrast, Lloyds is projected to yield approximately 3.7%, favored by investors seeking more direct returns through dividends.
Conclusion: Which Stock Will Outperform?
As we approach 2026, Lloyds may edge ahead regarding higher income and stable returns. Nonetheless, Barclays retains potential for unexpected gains due to its appealing valuation and diversified portfolio. Investors should consider the long-term outlook and remain patient as both stocks present opportunities worthy of exploration.
