Barclays (LSE: BARC) shares look remarkably cheap compared to many UK banking stocks right now.

The company’s shares trade on a price-to-book (P/B) ratio of 0.7 as I write on 17 March. Meanwhile, HSBC shares are sitting at roughly 1.4 by the same metric.

It’s a similar story for the likes of Lloyds and NatWest, both trading at multiples of around 1.2. 

So on paper, Barclays shares look to be an absolute bargain in the sector. But is there a reason behind the steep discount or is it a bargain hiding in plain sight?

Recent stock price fall

Barclays shares have been on an impressive run of late. The stock price is still up 33% in the last 12 months and 115% in the last five years.

However, it’s clear that some doubts are starting to creep in. The stock has been hit hard despite strong profitability and returns to shareholders.

Recent worries about what might be lurking in its loan book seem to be the problem. Investors have been spooked by the company’s exposure to failed lender Market Financial Solutions (MFS).

One reason for the steep discount could be concern about the actual book value of its assets.

Are the concerns overblown?

While the stock has been under pressure, it’s not all doom and gloom for investors. In fact, the headline numbers remain strong.

The company reported a 12% increase in 2025 profits, with an 11.3% return on tangible equity (ROTE) and 14.3% Common Equity Tier 1 (CET1) ratio.

Compare those key ratios to HSBC. That bank reported an average 13.3% ROTE for 2025, with a 14.9% CET1 ratio. Both ratios look stronger, which could justify a premium relative to Barclays, but the discount on a P/B basis looks steep.

Of course, HSBC is not risk-free either. The company’s 2025 results showed an uptick in expected credit losses, and management is embarking on its own operational restructure.

The question for investors to consider is whether the perceived stability of HSBC is worth the significant premium relative to Barclays.

Shareholder returns

Then there’s the shareholder-friendly policies. Barclays is targeting more than £15bn in capital distributions by 2028.

Those types of figures aren’t what I would expect from a company under pressure and with a weak balance sheet.

A 0.7 P/B multiple as I write means that investors are valuing the company at a steep discount to its peers as well as the book value of its net assets.

If there are no further issues with the loan book, this could represent a huge opportunity for investors to capture that value.

However, discounts often exist for a reason and deteriorating asset quality could create more headaches.

My verdict

Barclays shares are trading at a steep relative discount to other banking stocks including HSBC.

However, the price-to-book multiple is not the only metric to consider. Investors are clearly spooked by the MFS exposure and worried about asset quality. I certainly think the stock is one for investors to consider further given the valuation gap.

Should further credit quality issues emerge that would justify a discount to peers. However, if the loan book does hold up, the company could be temporarily cheap, which makes it an interesting potential opportunity.