Second-quarter total income rose 16% to £8.3bn (£8.1bn expected), driven by strong Investment Bank performance.
Profit before tax rose 31% to £3.3bn (£3.1bn expected), as income growth and lower-than-expected impairment charges more than offset higher costs.
Credit impairment charges rose to £571mn (£614mn expected), and underlying credit performance remained broadly stable.
Capital levels remained strong, with the CET1 ratio unchanged from the end of 2025 at 14.3% (14.3% expected), or 14.0% including the new £1bn buyback announced today. The interim dividend nearly doubled, to 5.9p per share.
Guidance for 2026 was raised, with total income now expected to reach around £31.5bn (£31.2bn expected), up from the previous guidance of around £31bn.
The shares fell 4.8% in early trading.
Our view
Barclays delivered a decent second quarter, with income and profit ahead of expectations, guidance raised, and shareholder returns increased. The negative market reaction seems more a reflection of high expectations already baked in ahead of results day.
There are a few moving parts to operations, but looking at more traditional interest income streams, the environment remains supportive. 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 remains a modest headwind, and mortgage margins are still under some pressure. But lending is growing, and the structural hedge continues to underpin income growth, acting as a steady source of income. Barclays raised its guidance for interest income from lending operations, though we think that these benefits are now better understood, limiting the scope for major surprises.
But Barclays is also one of the largest global investment banks and has a sizeable US credit card business.
Higher rates, along with rising US credit card balances, have been a tailwind, but they can also be a double-edged sword. It’s higher risk, and returns haven’t been as strong as other parts of the business. Still, fears that US card defaults would spike have not come to pass, and the reshaping of the portfolio is helping improve returns.
The large Investment Bank is one of Barclays’ key differentiators and a driving force behind new medium-term targets. It delivered a strong quarter, helped by favourable markets and improving corporate deal activity, with returns comfortably above the 2026 target. Diverse income streams are a benefit when economic conditions are uncertain, but it remains to be seen whether this level of performance can be sustained.
The balance sheet is well capitalised, and we had previously called for management to be more adventurous, so we support the new £1bn buyback (£0.8bn expected), which pushes the capital ratio to the top of the target range. Barclays’ plan to return more than £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 justified, and there is still some upside if recent momentum can be sustained. But the easier gains are now behind us, and we would still like to see more proof that the revamped Investment Bank can compete with US peers across 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 that yields are variable and not a reliable indicator of future income. Keep in mind that 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.