Barclays (NYSE:BCS) raised its 2026 income target after reporting what Group Finance Director Anna Cross described as another strong quarter, supported by broad-based performance across its U.K. operations, investment bank and U.S. consumer business.
Cross said the group generated a 16.1% return on tangible equity, or ROTI, in the second quarter and 14.8% in the first half. All three U.K. businesses produced ROTI above 20%, while investment banking ROTI rose nearly 4 percentage points from a year earlier to 16%. The U.S. Consumer Bank generated 10.5% ROTI excluding a gain related to American Airlines.
Cost Actions and Credit Outlook
Cross said Barclays expects to take additional cost actions later in 2026 to create greater cost flexibility beginning in 2027. The measures are intended to improve returns structurally and increase management’s confidence in achieving ROTI above 14% in 2028, as well as an “all-weather” ROTI beyond that period.
She said the planned actions would not disrupt Barclays’ 2026 distribution plans or financial targets, including its target for a cost-income ratio in the high 50s.
The group recorded a £571 million impairment charge in the second quarter, equivalent to a 51-basis-point loan loss rate. Cross said consumer and corporate balance sheets remained robust and borrowers were behaving rationally. Barclays continues to expect its 2026 loan loss rate to be around the top end of its 50-to-60-basis-point range.
Consensus unemployment expectations increased during the period, consuming post-model adjustments recognized in the prior quarter in Barclays U.K. and the U.S. Consumer Bank. Barclays retained a £68 million post-model adjustment in the investment bank because of downside risks from global macroeconomic uncertainty.
Capital, Funding and Liquidity
Group Treasurer Dan Fairclough said Barclays ended the quarter with a common equity tier 1, or CET1, ratio of 14.3%, having generated 115 basis points of capital from profits year-to-date. On a pro forma basis after a £1 billion share buyback, the ratio was 14%.
The bank continues to intend to operate around the top of its 13% to 14% CET1 target range while awaiting regulatory clarity. Fairclough said Barclays’ guidance for 2027 regulatory risk-weighted asset inflation remains unchanged at £19 billion to £26 billion, including Basel 3.1 changes and expected implementation of an internal-ratings-based model in the U.S. Consumer Bank in the second half of 2027.
Barclays reported a Tier 1 capital ratio of 18% and total capital ratio of 20.3%, above regulatory requirements of 14.6% and 17.8%, respectively. Its AT1 component represented 3.6% of risk-weighted assets.
Fairclough said the group completed its 2026 capital issuance plan following an inaugural A$1 billion AT1 offering and a £750 million Tier 2 issuance during the quarter. Barclays also completed its £10 billion MREL issuance plan in the first half amid supportive credit market conditions. The bank may consider pre-funding 2027 issuance depending on market conditions, though Fairclough did not provide a specific forecast.
Liquidity remained above regulatory requirements, with an average liquidity coverage ratio of 158%, representing £117 billion of excess liquidity. The average net stable funding ratio was 136% and the loan-to-deposit ratio was 75%. Customer deposits increased 1% across segments, led by growth in International Corporate Bank deposits.
Investment Bank Strategy and U.K. Growth
Responding to questions about the investment bank, Cross said Barclays is pursuing a disciplined approach to growth rather than expanding its balance sheet aggressively. The bank is seeking revenue growth commensurate with risk-weighted assets while maintaining its risk posture, she said, noting that value-at-risk had not materially changed and that there were no trading loss days during the quarter.
Cross said several targeted investment-banking growth areas require limited balance-sheet deployment, including mergers and acquisitions, equity capital markets and the International Corporate Bank. She characterized these as more recurring and fee-based businesses.
Barclays is also focused on organic expansion in its U.K. businesses, where it has deployed £25 billion of a planned £30 billion in risk-weighted assets. Cross said the group expects organic growth of roughly 5% annually, while setting a high threshold for acquisitions. Potential transactions would need to add capabilities or volume and be assessed against the returns available from share repurchases, she said.
On the U.K. economy, Cross said nominal and real growth had exceeded that of the eurozone, supporting real wage growth, house prices and stable employment. She added that corporate confidence appeared to be improving, with surveyed businesses planning increased investment, including in technology. U.K. corporate lending was up 9% over the past year, according to Cross.
Regulatory Discussion and Treasury Outlook
Fairclough said proposed Bank of England leverage changes would modestly reduce Barclays’ Tier 1 leverage requirement by 8 basis points, but he described the aggregate impact as disappointing. He said the bank continues to engage with regulators on international competitiveness, particularly concerning the treatment and use of models and broader standardized Basel rules.
He said Barclays had not experienced a material direct impact from quantitative tightening on balance-sheet management, although increased use of the Bank of England’s repo reserve scheme suggests other banks may be positioning for tighter reserve conditions.
Barclays’ structural hedge income accounted for about 45% of second-quarter group net interest income, Fairclough said. Management expects the hedge to provide about half of planned group income growth between 2025 and 2028. The bank’s planning assumptions use a 3.5% reinvestment yield, while swap rates were 4.3% in the second quarter.
Fairclough also said Barclays remains focused on achieving a single-A composite rating for Barclays PLC senior debt across rating indices, which would require an upgrade from either Moody’s or S&P.
About Barclays (NYSE:BCS)
Barclays PLC (NYSE: BCS) is a British multinational bank and financial services company headquartered in London. The firm provides a broad range of banking and financial products to individual, corporate and institutional customers. Its core activities span retail and business banking, credit cards and payments, corporate and investment banking, and wealth and investment management.
In retail and business banking, Barclays offers deposit accounts, mortgages, personal and business loans, and card services.
