Barclays (LSE: BARC) has decided to reward shareholders even as costs climb, revealing a delicate balancing act between growth, redress obligations, and financial optics.
The lender announced a £500 million share buyback brought forward from its full-year plans, sending its shares 2.9% higher.
The bank reported a 6.9% decline in pretax profit to £2.08 billion in the quarter to September, falling short of Visible Alpha consensus of £2.15 billion.
This figure masks an additional £235 million set aside for UK motor finance redress, taking the total provision to £325 million from £90 million.
Barclays said the increase reflects the likely number of cases falling under the UK Financial Conduct Authority’s proposed methodology, highlighting the continuing challenges the sector faces in handling historical mis-selling.
Despite these headwinds, total income rose 9.5% to £7.17 billion, supported by broad-based growth across divisions. Barclays UK income jumped 16%, bolstered by the Tesco Bank acquisition, while the UK Corporate Bank grew 17%. Investment Bank income climbed 8%, Private Bank & Wealth Management 3%, and the US Consumer Bank 19%.
Operating costs also rose, up 7.6% to £4.25 billion, pushing the cost-income ratio to 63% from 61%. Credit impairment charges and total litigation and conduct costs also climbed sharply, reflecting the pressures of regulatory compliance and market risks.
Still, the bank’s return on tangible equity stood at 10.6% in the quarter and 12.3% year-to-date. Barclays has upgraded its 2025 RoTE guidance to above 11% and reaffirmed its 2026 target of greater than 12%, citing a stronger outlook for stable income and early delivery of efficiency savings. CEO CS Venkatakrishnan promised further updates to 2028 targets alongside full-year results.
Expectations for net interest income in 2025, excluding Barclays Investment Bank and Head Office, were nudged up to above £12.6 billion, while Barclays UK is expected to generate over £7.6 billion. The bank’s common equity tier 1 ratio strengthened to 14.1% at September 30, up from 13.6% at the end of 2024.
Barclays is keen to project strength and growth despite rising provisions and regulatory costs, putting shareholder returns front and centre while the wider banking sector contends with uncertainty.