Barclays 1Q26: Steady as she goes, resilient beneath the noise

• Revenues rose +6% y/y to £8.2b, while pre-impairment profits similarly grew +8% y/y to £3.6b.
• Management maintained most targets, with FY26 loan-loss guidance marginally higher after a single-name charge.
• Liquidity and asset quality remained strong. CET1 stayed near the top of management’s guidance range.
• Barclays’s CET1 buffer appears thinner than peers, but still adequate for now.
• We provide our thoughts on different Barclays bonds available, including perpetuals and non-perpetuals in SGD, USD, and AUD.

Barclays plc (‘Barclays’) recently released its 1Q26 results, delivering steady growth as expected. We review its 1Q26 performance in greater detail, discuss its outlook, and conclude with our top recommendations.

1Q26 revenues continued to grow at a steady pace

Barclays delivered record quarterly revenues of £8,163m in 1Q26 (+6% y/y), supported by both net interest income (NII) (+6%) and net fee, commission and other income (NFCI) (+6%) (Chart 1).

NII growth was driven by both higher net interest margins (NIM) and a larger balance sheet. At the group level (y/y), NII benefited from a +10 bps improvement in NIM and +5% growth in average interest-earning assets (Table 1). Barclays generally benefited from higher structural hedge income, which supported its core Barclays UK segment, where NIM improved by +17 bps to 3.72%. Meanwhile, US Consumer Bank saw the clearest margin-led uplift, with NIM rising +223 bps to 12.76%, helped by partner reward updates.

(NII / NIM information above excludes Investment Bank and Head Office – the figure above is more representative of a typical bank’s loan / deposit book.)

Meanwhile, Barclays’s Investment Bank revenues rose +4% y/y to £4,028m in 1Q26, including a +10% increase in NFCI to £1,287m. Investment Bank performance was broadly supported by a similar +6% growth in its core Global Markets business (Table 2). Meanwhile, NFCI was likely driven by stronger performances in Barclays’s advisory (+78%) and equity capital markets businesses (+31%). We note the weaker corporate lending income of £16m in 1Q26 (1Q25: £156m), though management attributed this to c. £40m of fair-value losses in 1Q26 compared to c. £105m of fair-value gains in the previous 1Q25.

(The Investment Bank business primarily comprises non-NII, with NII only accounting for £383m in 1Q26. The figures above, however, include NII as no further detailed data was available.)

Chart 1: Barclays’s revenues grew +6% y/y

Table 1: Barclays’s net interest margins improved in 1Q26

Table 2: Investment Bank revenues supported by Global Markets business

Contained costs supported stronger operational profits

Barclays’s cost growth was contained relative to revenue growth, allowing Barclays to deliver positive operating leverage (Chart 2). Total operating expenses increased +4% from £4,365m to £4,547m. Operating costs excluding exceptional items grew just +2% to £4,359m, helped by £150m in gross efficiency savings as guided by management previously. Both figures came below the +6% growth in revenues highlighted above. While costs included a £105m legal provision relating to the UK FCA motor finance redress scheme, the underlying cost picture broadly looks manageable, excluding such costs.

(Management is guiding for £2.0b in gross efficiency savings from 2026-2028, implying a quarterly run-rate of £167m.)

Higher impairments weighed on Barclays’s profitability, with impairment charges up +28% to £823m. The key driver here was a £228m single-name impairment relating to the collapse of a mortgage lender (MFS) at the centre of an alleged fraud. This added +20 bps to Barclays’s loan-loss rate, which increased from 61 bps to 74 bps. Excluding this, the loan-loss rate would have remained within management’s guidance range of 50 to 60 bps.

Overall profitability remained resilient, with underlying operating leverage improving despite headwinds from other line items. Pre-impairment profits rose +8% to £3,637m, while profit after tax improved +4% to £2,176m, with return on tangible equity still healthy at 13.5%.

Chart 2: Cost-income ratio improved in 1Q26

Management targets maintained despite recent noise

Barclays’s interest income outlook is anchored by its structural hedge, which helps lock in interest income on stable deposit balances and provides strong visibility on future NII. It has already locked in a large share (95%) of expected hedge income for FY26. Further benefits would come from replacing older low-yield hedges (~1.5%) with newer higher-yield hedges (~3.5%).

(Note: Structural hedges lock in the revenue side of NII. Margins [NIM] could still fluctuate depending on funding & deposit costs, but we do not expect significant increases in such costs.)

Consequently, we think Barclays remains on track to deliver steady single-digit growth this year. This is primarily based on single-digit top-line growth as guided by management. On the cost side, we expect incremental support via Barclays’s planned £2b efficiency programme. Meanwhile, impairments could remain stable based on FY25 and 1Q26 trends, assuming no significant deterioration in the macroeconomic environment in the UK and the US.

Management kept virtually all but one of its targets unchanged from the previous quarter (Table 3). The only adjustment was on impairments: management now expects FY26 loan loss rate to be around the top of its 50 – 60 bps range. However, this was mainly due to the single-name impairment mentioned above; excluding this, the underlying impairment story would have remained stable. Apart from that, the rest of FY26 to FY28 guidance was left unchanged, reinforcing management’s confidence in its medium-term strategy and ability to generate solid business growth.

Table 3: Management targets left mostly unchanged (except for loan loss rate)

Strong liquidity and funding profile

Barclays’s liquidity position remains a core credit strength, with regulatory ratios well above minimum requirements. It reported a liquidity coverage ratio of 165% in 1Q26 (4Q25: 170%), representing a £126b surplus over requirements. Furthermore, its liquidity pool remains conservative in nature, with a majority hedged for interest rate risks, and £242b (74%) of it in cash. While Barclays did not provide a granular 1Q26 breakdown of its liquidity pool, the majority of its non-cash holdings as of FY25 were highly-rated government bonds (AAA to AA-).

Funding is supported by a large deposit base and a conservative loan-to-deposit ratio. Its net stable funding ratio of 135% was also well above regulatory requirements (implying a £167b surplus) while its loan-to-deposit ratio remained relatively stable at 75% (Dec 2025: 73%). As with many well-established banks, Barclays has significant funding flexibility from its  UK franchise, diversified customer deposits, and access to wholesale markets supported by its investment-grade rating.

Stable asset quality with sufficient capital buffers

Barclays’s asset quality remained stable despite continued balance sheet growth. Gross loan exposure rose to £444b in 1Q26, up from £430b in 4Q25; of this, Stage 3 exposure was also up just slightly from £7,569m (1.7%) to £7,968m (1.8%). This increase in Stage 3 exposure was consistent with the MFS-related single-name charge, though other segments also saw slightly larger Stage 3 exposures too.

Impairment coverage (impairment allowance / gross exposure) edged up slightly to 1.3% (Dec 2025: 1.2%), particularly on Stage 3 loans (from 35.7% to 37.3%). As mentioned above, impairment charges in 1Q26 itself were up primarily due to a single-name charge – Barclays appears to be well-prepared for this, stepping up its corporate loan provision significantly in line with the MFS scandal. We also note that Barclays’s loan loss rate would have looked more stable without this MFS charge.

Barclays’s capital position remains adequate. The group reported at 14.1% CET1 ratio as of 1Q26, or 13.9% (pro-forma) after its already announced £500m buyback. This was marginally lower than the 14.3% reported at 4Q25, primarily due to risk-weighted assets (RWA) growth. We note that the MFS impairment (£228m) and higher motor finance provisions (£105m) were already reflected in 1Q26 CET1 ratios, but the direct effect was small – they amounted to £333m pre-tax, equivalent to about 9 bps of RWAs pre-tax or around 7 bp post-tax.

Nonetheless, the 13.9% pro-forma ratio remains near the top of management’s target range. Meanwhile, its CET1 regulatory headroom remains sufficient, though we note it appears thinner than for other banks (Chart 3). Its latest disclosed CET1 requirement (excluding undisclosed PRA buffers) was 12.2%, implying around 190 bps of headroom, or around 170 bps after the buyback.

(Note: Barclays also has decent but not overly large buffers on its other capital requirements, including Tier 1 capital [17.5% vs 14.6% requirement], total capital [19.7% vs 17.8% requirement], and MREL [35.4% vs 30.5% requirement].) 

We expect its CET1 ratio to hover around current levels in FY26 and FY27 without meaningful improvement. Management has guided for >200bps in CET1 generation in FY26 (based on >12% RoTE); this would be larger than FY25’s 173bps, though we expect this to be offset by higher capital distributions guided by management. While capital distributions will be decided quarterly, management has already guided for £2b in dividends for FY26, significantly higher than the £1.2b in FY25. Looking further ahead, management is also guiding for regulatory-driven RWA inflation in FY27, with an estimated RWA impact of £19b - £26b (c. 5% - 7% of 1Q26’s RWA).

Chart 3: CET1 ratio comparison

Bond comparison

To summarise, we think Barclays remains a solid issuer, poised to deliver steady growth in the coming years while maintaining a balanced credit profile. We take a look at its SGD, USD, and AUD bonds below.

SGD bonds

These Barclays perpetuals generally have higher yields and reset spreads than peers (Table 4), and may be of interest to those seeking 4+% yields. We note that those with higher reset spreads could see lower probabilities of non-calls.

• BACR 8.300% Perpetual Corp (SGD) and BACR 7.300% Perpetual Corp (SGD) both have larger reset spreads than most of the SGD bank perpetuals universe.
• BACR 5.400% Perpetual Corp (SGD) and BACR 4.650% Perpetual Corp (SGD) have similar reset spreads, with the latter having a slight edge (2.788% vs 3.083%). We nonetheless highlight that the former BACR 5.400% Perpetual Corp (SGD) has a higher indicative yield (4.61% vs 4.51%) despite a shorter time to call, indicating some relative value here.

(Note: Barclays only has perpetuals outstanding in the SGD market. We remind investors that perpetuals come with accompanying loss-absorption and non-call risks.)

Table 4: SGD bond / perpetual comparison (Barclays perps bolded)

USD bonds

Barclays has many bonds outstanding in the USD space, including non-perpetuals (Table 5) and perpetuals (Table 6).

• We find the non-perpetuals fairly priced; they generally offer similar yields compared to similarly-rated (or 1 notch higher) peers.
• The Barclays perpetuals have slightly higher yields compared to peers. They may be of interest to those (i) seeking high levels of coupons, and (ii) who are looking for those with higher reset spreads. Examples include BACR 8.000% Perpetual Corp (USD) and BACR 9.625% Perpetual Corp (USD).

Table 5: USD non-perpetual comparison (Barclays bonds bolded)

Table 6: USD perpetual comparison (Barclays perps bolded)

AUD bonds

Barclays has several senior unsecured and Tier 2 subordinated bonds outstanding in the AUD space (Table 7), though they appear more fairly priced to us.

• Senior unsecured: Barclays and peer bonds (rated 1 notch higher) generally yield within 5.5% - 6.2%. Based on these indicative yields, there appears to be more relative value in the longer-tenor BACR 6.100% 24Mar2031 Corp (AUD) bonds with yields above the 6.0% mark.
• Subordinated: Barclays and peer bonds (rated 1 notch higher) generally yield over 6.0%. BACR 6.158% 28May2035 Corp (AUD) is the highest-yielding in this list due to its lower rating, though we also highlight its lower reset rate (3-month Bills + 2.000%) compared to the Lloyds 2033 bond (3-month Bills + 2.900%).

Table 7: AUD bond comparison (Barclays bonds bolded)

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds positions in BACR 8.300% Perpetual Corp (SGD), BACR 4.650% Perpetual Corp (SGD), STANLN 4.300% Perpetual Corp (SGD), BACR 6.158% 28May2035 Corp (AUD), HSBC 6.211% 21Mar2034 Corp (AUD), HSBC 5.722% 11Mar2035 Corp (AUD), and BACR 8.000% Perpetual Corp (AUD). The analyst who produced this report holds NIL positions in the abovementioned securities. This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.