Executive Summary / Key Takeaways

• Barclays PLC is executing a disciplined three-year plan to deliver structurally higher and more consistent returns, evidenced by a robust 13.2% Return on Tangible Equity (RoTE) in the first half of 2025 and a target of over 12% by 2026.
• The company is strategically rebalancing its Risk-Weighted Assets (RWAs) by deploying £17 billion into higher-returning UK businesses, while maintaining stable RWAs in the Investment Bank, aiming for a more balanced group profile.
• Operational efficiency and technological advancements are key drivers, with £350 million in gross efficiency savings in H1 2025 and a 20% reduction in Investment Bank trading systems, contributing to an improved cost-to-income ratio of 59% in Q2 2025.
• Shareholder distributions are progressively increasing, with £1.4 billion distributed in H1 2025, including a £1 billion share buyback, as part of a commitment to return at least £10 billion by 2026.
• Despite macroeconomic uncertainties and competitive pressures, Barclays' diversified business model and prudent risk management position it for sustained growth, with NII guidance for Barclays UK upgraded to exceed £7.6 billion in 2025.

A Legacy Forged, A Future Defined: Barclays' Strategic Ascent

Barclays PLC, a financial institution with roots tracing back to 1690, has evolved into a diversified global bank with a significant presence in the UK, Europe, the Americas, Africa, the Middle East, and Asia. Its core business encompasses retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The company's current trajectory is defined by a rigorous three-year plan, initiated in February 2024, aimed at fostering a "better run, more strongly performing and higher returning Barclays." This overarching strategy is built upon leveraging its diversified business model, enhancing operational efficiencies, and making targeted strategic investments to drive sustainable growth and shareholder value.

The financial services industry operates within a dynamic macroeconomic landscape, characterized by both resilience and uncertainty. While the US and UK economies have demonstrated remarkable strength, marked by robust employment, inflationary pressures persist, and geopolitical factors continue to introduce volatility. This environment presents both opportunities, particularly in areas like financing for the burgeoning AI and data center infrastructure, and challenges, such as weaker client confidence potentially delaying investment banking transactions. Barclays' diversified model, spanning consumer and wholesale activities across various geographies, is designed to provide structural protection and stability, enabling it to perform robustly across interest rate and credit cycles.

In this competitive arena, Barclays faces off against major global players like HSBC Holdings plc (HSBC), JPMorgan Chase & Co. (JPM), Bank of America Corporation (BAC), and Citigroup Inc. (C), as well as indirect competitors such as fintech companies and tech giants in digital payments. Barclays distinguishes itself through its strong global brand, extensive network effects, and deep expertise in investment banking. Its historical presence in UK retail banking provides a foundational advantage in customer retention, while its international diversification offers a broader product suite. For instance, in the UK, Barclays has maintained its share in current accounts and demonstrated pricing discipline in term deposits amidst strong competition. In investment banking, the firm ranks among the top five with 60 of its top 100 clients, a significant increase from 49 in 2023, and is on track to reach 70 by 2026. This client penetration, coupled with a more than one percentage point increase in market share across its three focus businesses during 2024, underscores its competitive strength.

Technological Edge and Operational Excellence: Fueling Growth

At the heart of Barclays' strategic transformation is a relentless focus on technological differentiation and operational excellence. The company's core technology encompasses advanced digital banking platforms, sophisticated trading and risk pricing systems within its Investment Bank, and data analytics capabilities that underpin its credit card portfolio management. These technological foundations are not merely support functions but are integral to its competitive moat and financial performance.

The tangible benefits derived from these technological investments are quantifiable and impactful. In Barclays UK, the company increased its digitally active customer base by 700,000 in 2024 and rationalized its branch network by over 25% in the same period. This digital adoption enhances customer engagement and drives efficiency. Within the Investment Bank, a 20% reduction in trade capture and risk pricing systems over the past two years (to Q4 2024) has significantly bolstered efficiency and operational resilience. Management notes that the benefits of these investments are "coming through during the period of this plan." For the UK Corporate Bank, investments in digital and lending propositions have been instrumental in attracting approximately 330 new clients in the first half of 2025, demonstrating the direct link between technology and client acquisition.

Barclays is also actively engaged in R&D and new technological developments. The long-term partnership with Brookfield (BAM) to transform its payment acceptance business involves a circa £400 million investment over the next three years, with the stated goal to "enhance the range of services, improve efficiency, and support growth." In the US Consumer Bank, the successful launch of a tiered savings product in Q3 2024 has driven retail deposit growth, improving the funding mix. Furthermore, continued investment in advisor growth, product development, and digital capabilities within Private Bank & Wealth Management underscores a commitment to innovation across all segments.

The "so what" for investors is clear: these technological advancements are directly contributing to operational leverage, cost efficiency, enhanced client engagement, and market share gains. By streamlining processes and improving digital capabilities, Barclays is building a more resilient and agile bank, capable of delivering higher and more consistent returns. This technological roadmap is foundational to the company's long-term growth strategy and its ability to maintain a competitive edge in an increasingly digital financial landscape.

Strategic Rebalancing and Segment Performance: A Diversified Engine

Barclays' strategic rebalancing of its RWA allocation is a cornerstone of its plan to optimize returns. Since 2023, the company has deployed £17 billion of business growth RWAs into its UK-focused businesses—Barclays UK, the UK Corporate Bank, and Private Bank & Wealth Management—with £10 billion stemming from organic growth. This represents over half of the planned £30 billion deployment by 2026. Concurrently, Investment Bank RWAs have been intentionally kept stable for 3.5 years, a move designed to drive efficiency and productivity, ensuring the division remains a consistent source of capital generation for the group.

Barclays UK (BUK) has been a strong performer, delivering a RoTE of 19.7% in Q2 2025. Its Net Interest Income (NII) increased by 16% year-on-year and 2% quarter-on-quarter to £1.9 billion in Q2 2025, with the Net Interest Margin (NIM) remaining stable. The company has upgraded its FY 2025 NII guidance for BUK to exceed £7.6 billion, with over £3.9 billion expected in the second half, supported by structural hedge reinvestment and sustained lending momentum. Mortgage balances have grown for four consecutive quarters, and the acquisition of 1.6 million new credit card customers over the past 18 months is expected to drive higher interest-earning lending from H2 2025. The acquisition of Tesco Bank (TSCDY), completed in November 2024, is a strategic move to bolster its UK retail presence, leveraging Barclays' expertise in partnership credit cards. While integration costs are expected to increase BUK's cost-to-income ratio in 2025 from 52% in 2024, it is projected to fall to circa 50% in 2026.

The UK Corporate Bank achieved a RoTE of 16.6% in Q2 2025 (inclusive of a £39 million litigation charge). Its NII was up 21% year-on-year in Q2 2025, reflecting robust deposit and lending growth, alongside benefits from structural hedge reinvestments. Investments in digital and lending propositions have successfully attracted approximately 330 new clients in H1 2025, contributing to lending growth for three consecutive quarters.

Private Bank & Wealth Management delivered an impressive RoTE of 31.9% in Q2 2025. The segment attracted £0.9 billion in net new assets under management in Q2 2025, contributing to an 8% year-on-year growth in client assets and liabilities. This business has demonstrated an 11% annualized growth since 2023, aligning with its double-digit growth target, supported by ongoing investment in advisor growth and digital capabilities.

The Investment Bank (IB), despite a challenging market for certain activities, recorded a RoTE of 12.2% in Q2 2025, contributing to a H1 2025 RoTE of 14.2%. Total income for the IB was up 10% year-on-year in Q2 2025, with capital productivity (income over average RWAs) improving by 80 basis points to 6.7%. The IB's performance is a testament to both structural improvements, such as deeper client relationships and increased market share in focus businesses, and its ability to monetize cyclical market activity. Stable income streams now account for 40% of the IB's income, up from 29% in 2021, reflecting a strategic shift towards more consistent revenue generation. Markets income, in US dollar terms, was particularly strong, up 34% year-on-year in Q2 2025, with FICC rising 35% and Equities up 34%. While Investment Banking fees fell 10% in Q2 2025, reflecting a tough comparison to a large ECM transaction in Q2 2024, ECM activity gained momentum towards the end of Q2 2025, with Barclays acting as bookrunner on seven of the top twelve US IPOs.

The US Consumer Bank (USCB) is steadily progressing towards its targets, achieving a RoTE of 10.2% in Q2 2025, an improvement from 9.2% in Q2 2024. Its NIM expanded to 10.8% in Q2 2025, with a target of over 12% by 2026, driven by asset repricing, growth in higher-margin retail balances, and an improved funding mix. The cost-to-income ratio improved by two percentage points to 48%, on track for a mid-40s target by 2026. The acquisition of General Motors card balances, expected in Q3 2025, is projected to enhance USCB RoTE from Q4 2025, despite an anticipated day-one charge of circa £100 million and subsequent stage migration charges. The non-renewal of the American Airlines (AAL) partnership beyond 2026 will release capital for diversification, with the GM portfolio offsetting about a quarter of the lost balances.

Financial Health and Capital Management: A Foundation for Growth

Barclays' recent financial performance underscores its robust health and disciplined capital management. In Q2 2025, the company reported a 14% year-on-year increase in income to £7.2 billion, a 28% rise in profit before taxes to £2.5 billion, and a 41% surge in earnings per share to 11.7p. The group RoTE reached 13.2% in H1 2025, a notable improvement from 11.1% in H1 2024, positioning the company well for its 2025 target of circa 11% and 2026 target of over 12%. The cost-to-income ratio improved by four percentage points year-on-year to 59% in Q2 2025, reflecting £350 million in gross efficiency savings in H1 2025, on track for a circa £500 million target for the year.

Capital generation remains strong, with the CET1 ratio standing at 14% in Q2 2025, comfortably within the upper half of its 13%-14% target range. The company generated approximately 100 basis points of capital from attributable profits in H1 2025, with an expectation of around 170 basis points for the full year. This strong capital position supports progressive shareholder distributions, with £1.4 billion distributed in H1 2025, a 21% increase year-on-year, including a £1 billion share buyback and a 3p dividend per share. Barclays is committed to returning at least £10 billion to shareholders by 2026.

Liquidity and funding are also robust, with a 74% loan-to-deposit ratio, a 136% net stable funding ratio, and an average Liquidity Coverage Ratio (LCR) of 178% in Q2 2025. Tangible book value per share has grown for eight consecutive quarters, reaching 384p in Q2 2025, with the majority of the remaining cash flow hedge reserve expected to unwind by the end of 2026, further contributing to consistent TNAV growth.

Risks and Challenges: A Prudent Approach

While Barclays demonstrates strong momentum, it operates within an environment subject to inherent risks. Macroeconomic uncertainty, including potential shifts in tariff policies and interest rate trajectories, could impact financial performance. The acquisition of General Motors (GM) card balances, while strategically beneficial, is expected to incur a circa £100 million day-one charge in Q3 2025 and subsequent stage migration charges of circa £50 million for several quarters from Q4 2025. Regulatory changes, such as the timing and impact of Basel 3.1 implementation and potential increases in Pillar 2A requirements, introduce an element of uncertainty in capital planning. Furthermore, competitive pressures, particularly in term deposit pricing, necessitate disciplined strategic responses. However, Barclays' management emphasizes a proactive and prudent approach to risk management, with a diversified business mix designed to mitigate these challenges.

Conclusion

Barclays PLC is executing a compelling strategic narrative, transforming into a higher-returning, more efficient, and better-balanced financial institution. The disciplined implementation of its three-year plan, marked by strategic RWA rebalancing, robust operational improvements, and a clear focus on technological advancements, is yielding tangible results across its diversified segments. The consistent growth in RoTE, coupled with strong capital generation and a commitment to progressive shareholder distributions, underscores a compelling investment thesis.

The company's ability to leverage its technological edge in digital banking and sophisticated trading platforms, alongside its deep client relationships, positions it favorably against a competitive backdrop. While macroeconomic uncertainties and regulatory shifts present ongoing challenges, Barclays' proactive risk management and strategic agility provide a solid foundation. The outlook for sustained NII growth, improving cost efficiencies, and continued RWA optimization suggests a clear path towards achieving and potentially exceeding its 2026 targets, making Barclays a noteworthy consideration for discerning investors.