Barclays (LSE:BARC) shares look extremely inexpensive at the moment compared to those of many UK banks.

As I write on March 17, the company’s shares are trading at a price-to-book ratio (P/B) of 0.7. Meanwhile, HSBC according to the same indicator, the shares are at around 1.4.

It’s a similar story for people like Lloyds AND NatWestboth trade at multiples of around 1.2.

So, on paper, Barclays stock looks like an absolute bargain in this sector. But is there a reason for such a steep discount, or is it a bargain hiding in plain sight?

Recent decline in share prices

Barclays shares have been on an impressive upward trend lately. The share price is still up 33% over the last 12 months and 115% over the last five years.

However, it is clear that doubts are beginning to appear. The company’s stock has been hit strenuous despite high profitability and shareholder returns.

The problem appears to be recent concerns about what may be lurking in the loan book. Investors were spooked by the company’s exposure to failed lender Market Financial Solutions (MFS).

One reason for the immense discount may be concern about the actual book value of the assets.

Are the fears exaggerated?

Although the company’s shares are under pressure, this does not mean only bad prospects for investors. In fact, headline numbers remain robust.

The company reported 12% earnings growth in 2025, with a return on physical capital (ROTE) of 11.3% and a Common Equity Tier 1 (CET1) ratio of 14.3%.

Compare these key metrics with HSBC. This bank recorded an average ROTE of 13.3% for 2025 with a CET1 ratio of 14.9%. Both metrics appear stronger, which may justify a premium over Barclays, but the discount on a P/B basis looks high.

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

Investors should consider whether HSBC’s perceived stability is worth a significant premium over Barclays.

Shareholder returns

In addition, there is a shareholder-friendly policy. Barclays plans to distribute more than £15 billion of capital by 2028.

This is not the type of data I would expect from a company under pressure and with a frail balance sheet.

As I write this, a P/B multiple of 0.7 means investors are valuing the company at a significant discount to its peers, as well as to the book value of its net assets.

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

However, discounts often exist for a reason, and deteriorating asset quality can cause more problems.

My verdict

Barclays shares are trading at a significant relative discount to shares of other banks, including HSBC.

However, the price-to-booking multiplier is not the only metric to consider. Investors are clearly spooked by MFS’s exposure and are concerned about asset quality. I certainly think investors should consider this stock more carefully given the valuation gap.

If further credit quality issues arise that would justify a discount to other institutions. However, if the loan book holds up, the company could be temporarily inexpensive, making it an captivating potential opportunity.