I hold Lloyds. Is it madness to buy Barclays shares too?

I’m gearing myself up to buy Barclays (LSE: BARC) shares, but one thing is holding me back. I already have another FTSE 100 bank in my SIPP, Lloyds Banking Group (LSE: LLOY). Is there any point holding both?

Right now, the two have astonishing similarities. In fact all the big UK banks do, as their shares have flown across the board in recent years.

Higher interest rates have driven up net interest margins, the difference between what they pay savers and charge borrowers. It’s a key profit metric. Barclays and Lloyds both made a heap of money in 2025, with pre-tax profits of £9.1bn and £6.7bn, respectively. Profits grew at similar speeds too, 13% and 12%.

FTSE 100 rivals compared

Both announced generous share buybacks, of £1bn and £1.75bn. Share price performance has been very similar too. Last week, as investors gather them over Iran, Barclays and Lloyds shares both climbed 6%. Over 12 months, they’re both up around 36%.

However, Barclays has done notably better over three years. It’s up 180% in that time. Lloyds climbed 105%. In a way, I’d expect that, because there’s a key difference between the two. Lloyds is a pure play on the UK economy. It’s focused on domestic retail and commercial banking, with a big exposure to mortgages and UK consumers.

Barclays is far more diversified. Alongside its UK operations, it has a significant international presence and investment banking division. Its shares are therefore more exposed to global markets and deal-making activity. This makes it riskier, but potentially more rewarding too. Despite that, both have surged the same interest rate wave, then slowed as valuations started to look stretched and interest rate expectations stabilised.

But following solid 2025 results, both look reasonably priced again. Barclays is the cheaper today, with a forward price-to-earnings (P/E) ratio of just 7.75. Lloyds is a little pricier at 9.95. That low P/E has me itching to buy Barclays. Then I remember that it’s exposed to the private equity and shadow banking market, which is under pressure right now. Something I don’t have to worry about with Lloyds.

Banking stock lookalikes

So what about income? Lloyds has the more generous and progressive dividend policy, while Barclays prioritises buybacks. As a result, Barclays’ trailing yield of 2.21% is beaten by Lloyds, which yields 3.73%. On a forward basis, they yield 3.5% and 4.3%, respectively. Personally, I prefer dividends hitting my account, although I’m not averse to the odd buyback or two. Lloyds has also been active on that front.

There are so many similarities. Both are sensitive to economic cycles, although I’d say that Barclays is likely to climb faster during the good times, and fall faster when the market turns. We’ve seen that lately. Barclays shares are down 15% over three months, but Lloyds shares are flat. Which may explain that lower Barclays P/E.

If I did buy Barclays, it would introduce a different mix of risks and very new streams. It’s not massive diversification, but spreads my bets within a sector that I like. At today’s low valuation, I think Barclays shares are impossible to resist. It’s at the top of my Buy list.