Barclays reported a 6% rise in first quarter total income to £8.2bn (£8.1bn expected).
Profit before tax rose 3% to £2.8bn (£2.8bn expected), as income growth was partially offset by higher costs and increased impairment charges.
Credit impairment charges rose to £823mn (£838mn expected), reflecting a £228mn single-name charge in the Investment Bank, with underlying default rates remaining broadly in line with expectations.
Capital levels fell slightly, with the CET1 ratio easing from 14.3% to 14.1% (14.2% expected), or 13.9% including a new £500mn buyback announced today.
Guidance for 2026 was reiterated, pointing to total income of £31bn (£31.1bn expected). Barclays still expects to return more than £15bn to shareholders over 2026-28.
The shares fell 2.9% in early trading.
Our view
Barclays’ update was steady rather than spectacular, but management put out a confident tone on the call. They’re happy with where consensus sits for 2026 and think expectations for 2027 and 2028 are too low – a positive signal.
There are a few moving parts to operations, but looking at more traditional interest income streams, the environment remains supportive, albeit with signs that the tailwind is moderating. The UK arm generates over half of all interest income, so improving trends at home have been helpful.
The shift from savers to longer-term and less profitable accounts has slowed, though it remains a modest headwind, while the mortgage market is showing early signs of recovery. The structural hedge continues to underpin income growth, acting as a steady source of income. That said, we think hedge benefits are better understood than a year or two ago, so the scope for further upside from these drivers looks more limited from here.
But Barclays is also one of the largest global investment banks and has a sizeable US credit card business.
Higher rates, along with increased US credit card balances, have been a tailwind, but it can be a double-edged sword. It’s higher risk, and returns haven’t been as strong as other parts of the business. Still, for now at least, fears that US card default rates would spike haven’t come to pass.
The large investment bank is one of Barclays’ key differentiators and a driving force behind new medium-term targets. The diverse range of income streams is a benefit when economic conditions are uncertain, and volatile markets have acted as a tailwind. It remains to be seen whether this can be an ongoing trend; management is confident, but this is a key debate.
The balance sheet is well capitalised, and while we expected to see management hold on to a healthy buffer, there are questions about whether it could be more adventurous. This is a theme we’re seeing across the sector, and Barclays’ plan to return £15bn over 2026-28 looks pretty comfortable, though not guaranteed.
Barclays has seen a material re-rating over the past couple of years, coming off a very low sentiment base that shrouded the UK banking sector. We think the re-rating is justified, and there is still some upside if the recent upbeat sentiment can be sustained. But the easier gains seen in recent years are now behind us, and we’d like to see more proof that the revamped investment bank can compete with US peers in a range of conditions.
Environmental, social, and governance (ESG) risk
The financials sector is medium-risk in terms of ESG. Product governance is the largest risk for most companies, especially those in the US and Europe with enhanced regulatory scrutiny. Data privacy and security is also an increasingly important risk for banks and diversified financial firms. Business ethics, ESG integration and labour relations are also worth monitoring.
According to Sustainalytics, Barclays’ overall management of material ESG issues is strong.
Despite strong policies overall, Barclays has some room for improvement regarding customer data privacy and environmental commitments. Investigations are also ongoing into alleged currency manipulation, and its data security could be strengthened with more frequent risk assessments and external audits. The quality of its environmental policy has deteriorated, with limited commitments to reducing emissions.
Barclays key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.