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I Barclays (LSE: BARC) share price to 2025, up 77% over the year. But he was thrown into the post office Lloyds Banking Group (LSE: LLOY), which is up 79%. Can their eye-popping run continue into the new year?
Everything is great FTSE 100 banks benefited from higher interest rates, which increased the net interest rate, the gap between what it pays to savers and what it charges borrowers.
FTSE 100 racing demons
However, with the Bank of England and the US Federal Reserve cutting interest rates again in December, and further cuts expected in 2026, margins may now be under pressure. I expect a very difficult year for both Barclays and Lloyds. But which looks like a better bet next year?
Barclays has moved further and faster than Lloyds in two years. Its shares have risen 205% over that period, almost double Lloyds’ 104% rise. It helped Barclays avoid the car finance scandal that hit Lloyds with its Black Horse division. But I wonder if Barclays will find it hard to keep up that blistering pace.
Shares are no longer the giveaways they were in 2023, when I bought Lloyds. At the time, both were trading at earnings ratios (P/E) of six or seven. Today, Barclays has a P/E of 13, while Lloyds is higher at 15.4. It doesn’t look overly expensive, but it’s not a bargain either.
On a book value basis, Barclays also looks better value, at around 0.85, compared to Lloyds at around 1.25. Estimates suggest Barclays may have more room for further gains, although that is not a metal certainty.
One key metric that analysts pay close attention to is return on tangible equity (RoTE). Lloyds predicts it will generate RoTE comfortably above 15% by 2026, boosted by its focused UK retail banking model and structural hedging that supports interest income as rates move. Barclays has a slightly lower expected RoTE of just under 13%. That remains strong, and is supported by a diversified business that includes US bank investments. That broad mix can add volatility, but it offers higher price opportunities if markets do well.
Stock predictions
So what do the experts say? At Barclays, consensus analysts produced a one-year price target of less than 474p. That’s below where the shares are trading today. For Lloyds, the target remains at around 101p, about 2.6% higher. In both cases, it is clear that growth expectations have fallen sharply after a strong run.
Investors should note that Barclays offers a low yield, forecast at 1.94%. However, management prefers share buybacks as their primary method of returning cash, and they are expected to be generous. Lloyds predicts it will yield around 3.7%, which suits me, as I prefer to see big fat dividends go directly to my account. It’s a personal thing.
Overall in 2026, Lloyds may just slip away from higher revenues and continued profits, but Barclays’ valuation and diversification model mean it can still surprise. Either way, one thing is certain. Long-term endurance will be more important than short-term fireworks. With that in mind, both banks are worth considering today.
