Is this the last chance to snap up Barclays shares at a bargain price?

Will 2023 be that year Barclays (LSE: BARC) share price is finally starting to deliver returns for long-time shareholders? I think so.

At FTSE 100 The bank’s profits remained good during the pandemic, while market conditions favored the investment banking division. Now, the rise in interest rates is expected to boost the profits of the group’s high street bank as debt levels rise.

Still cheap despite the results

Barclays shares have done well this year. They are up by 40% from October’s low.

However, at 190p, the bank’s shares are still trading at a 30% discount to their book value of 286p per share. I think that gap can start to close this year.

I think the key to higher valuations is for the bank to show consistent profitability. Recent progress seems encouraging to me.

In 2021, Barclays has a real return on equity of 13.4%. During the first nine months of 2022, the figure was 12.5%.

If the company’s 2022 results – due next week – show the same performance for all of 2022, I think the stock can continue to rise.

Recession worries

Rising interest rates have been good for banks, so far. But this may not continue.

If the UK economy falls into recession, Barclays could see higher levels of debt on mortgages and loans. Credit card arrears on Barclaycard can also skyrocket.

Another risk is that businesses may come under pressure to offer higher interest rates to savers. While the big lenders have been quick to raise mortgage rates over the past six months, they have been slower to increase interest rates on savings accounts.

CEOs of big banks were asked about this issue by MP recently. I have switched my savings account from a big bank to a small lender. I now earn 3% interest instead of just 0.6%. I suspect more people will do this unless the banks start to play the same.

my verdict

The broker’s current forecast of Barclays stock value at the price-to-earnings (P/E) ratio of 2023 is six. That’s cheaper than the competition NatWest and Lloyds. In fact, the stock looks cheap to me by any measure, given Barclays’ profits and strong financials.

I think we could see the stock price go back to a higher P/E ratio this year. One catalyst for this could be dividends. City analysts expect shareholder payouts to rise by around 20% annually over the next few years.

These numbers give Barclays a forecast 2023 dividend yield of 4.7%, rising to 5.6% in 2024. That looks interesting to me.

Although bank stocks have disappointed investors since 2008, I think they can finally return to normal. In my view, Barclays shares look too cheap at current levels. I think it could be a profitable purchase.