Since the middle of September, Barclays‘ (LSE:BARC) shares have fallen nearly 10% (18 October). Worse, at 432p, they’re down 20% from their 52-week high achieved in July.

As a shareholder, I find this disappointing. Having said that, the bank’s share price has more than doubled over the past five years. It could be a case of investors pausing for breath. Indeed, the City reckons the shares are worth 580p. That’s a huge 34% rise!

Why?

Much of this optimism appears to come from a belief that the bank will be able to improve its return on tangible equity (ROTE) over the next three years. By 2028, it’s targeting at least 14%. This year, it hopes to achieve “greater than” 12%. By comparison, its ROTE in 2023 was 9%.

Of the 19 analysts covering the stock, only one’s advising clients to Sell:

• Strong Buy: 2
• Buy: 11
• Hold: 5
• Sell: 1
• Strong Sell: 0

Of course, these are just opinions. However, they are based on extensive research and a careful consideration of the bank’s financial performance, which means they have a role to play when weighing up the pros and cons of investing.

Good value

Personally, I think the bank’s shares are attractively priced. Data compiled by the London Stock Exchange Group reveals that the stock has both the lowest historical price-to-earnings ratio and price-to-book (P/B) ratio in the sector.

Some of this reflects the fact that the group generates around half its income from its investment bank. Investors place a lower premium on these earnings as they can be volatile. The profit coming from traditional high street banking activities tends to be more reliable. Even so, the bank’s discount relative to its peers seems overly-cautious to me.

For example, based on earnings, if it was valued the same as, say, HSBC, its shares would be changing hands for 61% more.

Moreover, I don’t see why Barclays’ balance sheet should be viewed any less favourably than other banks. If its P/B ratio was the same as Lloyds, Barclays’ share price would be 86% higher.

Shareholder returns

Looking ahead, the bank intends to return more than £15bn to shareholders via share buybacks and dividends over the next three years.

To be honest, I’d prefer more of an emphasis on dividends as the stock’s yield of 2.7% lags that of, for example, NatWest (5.2%), HSBC (4%), and Lloyds (3.8%). However, I acknowledge repurchasing some of the bank’s shares should improve earnings per share and result in shareholders owning a larger proportion of Barclays.

But as much as I remain a fan of the bank, there’s a looming potential risk that needs to be examined.

Timing’s everything

Last week (16 October), the BBC reported that the country’s banks are now expecting higher taxes in this month’s Autumn Budget.

That’s why I think it might be better to wait a couple of weeks before considering the stock. Although any new tax is likely to be immaterial to Barclays — it reported a pre-tax profit of £6.1bn during the first six months of the year and had £435bn of cash on its balance sheet at 30 June — it could dampen investor sentiment towards the sector.

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James Beard owns shares in Barclays plc.