Barclays (BARC) shares fell 4.7% on Tuesday despite the bank reporting a strong second quarter, raising full-year income guidance and announcing a new £1 billion share buyback, as investors focused on higher costs and whether the results were strong enough after a recent rally.
The London-based lender reported pretax profit of £3.25 billion for the three months to 30 June, up 31% from £2.48 billion a year earlier, while total income increased 16% to £8.34 billion, beating analyst expectations of £8.12 billion. For the first half of the year, total income reached £16.50 billion, an 11% increase, with pretax profit rising 17% to £6.07 billion.
The strongest performance came from Barclays Investment Bank, where pretax profit jumped 32% to £1.72 billion, helped by higher revenue from Global Markets and investment banking fees. Equities revenue climbed 45% year-on-year, although analysts noted that this remained below the 68% growth reported by major US banking peers.
Barclays UK, Private Bank and Wealth Management, and the US Consumer Bank all fell short of some analyst forecasts, creating a mixed picture across the group despite the headline profit growth.
Why shares fell
The main concern for investors was the increase in operating costs, which rose 8.7% to £4.51 billion during the quarter, above expectations of £4.36 billion.
Barclays said the increase reflected business expansion, inflation and additional investment spending, although £200 million of efficiency savings helped offset some of the impact.
The bank also warned of further expenses, expecting up to £450 million in additional costs during the second half of 2026, including structural cost actions and changes to investment banking compensation.
The share price reaction was also linked to elevated expectations following strong performances from major US banks the previous week. Barclays shares had already gained around 7% between last Tuesday and Monday’s close as investors anticipated a positive update, leaving less room for further gains if results merely met expectations rather than significantly exceeded them.
Barclays raised its 2026 total income forecast to around £31.5 billion from previous guidance of £31 billion and increased its interim dividend to 5.9 pence per share from 3.0 pence. The bank also confirmed a £1 billion buyback as part of its plan to return £10 billion to shareholders between 2024 and 2026.
Chief executive CS Venkatakrishnan said the bank remained confident in delivering its financial targets and returning more than £15 billion of capital to shareholders between 2026 and 2028 through dividends and buybacks.
Although the results showed continued progress at the investment bank and stronger shareholder returns, investors appeared to be looking beyond the headline figures, with concerns over rising costs and whether Barclays can maintain its recent momentum against larger US rivals weighing on the shares.