Barclays Q1 2025 earnings: £2.7bn profit, 14% RoTE, and upgraded NII guidance reignite investor confidence

Barclays PLC reported a 19 percent year-on-year increase in profit before tax to £2.7 billion in the first quarter of 2025. This performance was supported by broad-based growth across its core operating segments, as the Group continued to execute its strategic roadmap focused on disciplined cost control, enhanced digital efficiency, and targeted capital returns. The return on tangible equity for the quarter stood at 14.0 percent, reflecting the Group’s ability to extract value across varying macroeconomic conditions and interest rate regimes.

The first quarter earnings come at a time when the UK banking sector is showing signs of post-pandemic stabilisation. As interest rate cycles mature and lending sentiment improves, financial institutions such as Barclays are increasingly benefitting from structural hedges and a return to more predictable trading patterns. Total Group income for the quarter grew to £7.7 billion, an 11 percent rise from the same period last year. Earnings per share climbed to 13.0p from 10.3p, reinforcing the bank’s ability to convert revenue gains into tangible shareholder value.

How Did Segment-Wise Income and Profitability Evolve?

Barclays UK posted income of £2.07 billion in Q1, which marked a 14 percent rise compared to the prior year. The growth was largely driven by the integration of Tesco Bank, completed in late 2024, which helped boost net interest income by 18 percent to £1.82 billion. Structural hedge income and modest lending growth contributed positively, although deposit attrition remained a headwind. Investment Bank operations generated income of £3.87 billion, reflecting a 16 percent increase from Q1 2024. Within that, Fixed Income, Currencies and Commodities revenue rose 21 percent, driven by higher client activity and favourable trading conditions. Equities income increased by 9 percent, or 27 percent on a like-for-like basis, excluding one-off gains from the previous year. Investment banking fees also improved by 4 percent, aided by improved debt capital market activity and steady M&A advisory flows.

The Private Bank and Wealth Management division recorded income of £349 million, up 12 percent year-on-year. This reflected healthy transactional activity and positive net new client asset flows, with client assets and liabilities reaching £212.4 billion. The U.S. Consumer Bank remained broadly flat, with income marginally increasing to £864 million. Seasonal balance contraction and foreign exchange effects dampened core growth, resulting in profit before tax declining to £55 million from £82 million in Q1 2024.

How Is Barclays Managing Operating Expenses?

Total operating expenses increased 5 percent year-on-year to £4.37 billion. This included £50 million in non-operating items related to long-term share-based compensation. Despite this rise, the Group achieved £150 million in gross cost efficiencies during the quarter. This reflects the early success of Barclays’ multi-year transformation programme targeting £0.5 billion in gross savings in 2025 and £2 billion by the end of 2026. The cost-to-income ratio improved to 57 percent, outperforming the full-year target of approximately 61 percent. Management noted that the cost trajectory remains well-controlled, even as the bank continues to invest in scalable digital infrastructure, AI-driven automation, and end-to-end process simplification across its retail and investment banking platforms.

What Is the Credit Quality and Impairment Trend?

Credit impairment charges rose to £643 million in Q1 2025, up from £513 million a year earlier. This resulted in a Group loan loss rate of 61 basis points, compared with 51 basis points in Q1 2024. The increase included a £74 million post-model adjustment, primarily to reflect U.S. macroeconomic uncertainty. However, underlying credit trends remained stable across most portfolios. In the U.S. cards portfolio, 30-day delinquency rates held steady at 3.0 percent, and 90-day rates improved slightly to 1.6 percent. In the UK, excluding Tesco Bank, card delinquencies remained low at 0.7 percent for 30-day arrears and 0.2 percent for 90-day arrears. The inclusion of Tesco Bank led to a one-time increase in expected credit loss provisions under IFRS 9, but no meaningful signs of portfolio deterioration were observed. Management confirmed that credit quality remained resilient despite external pressures from inflation and rate volatility.

How Strong Is Barclays’ Capital Position?

Barclays reported a Common Equity Tier 1 (CET1) ratio of 13.9 percent at the end of the quarter, an improvement of 10 basis points compared to Q4 2024. This increase was attributed to retained earnings and the strategic disposal of the German consumer finance unit, which released £3.3 billion in risk-weighted assets and added approximately 10 basis points to the CET1 ratio. The Group’s tangible net asset value per share improved to 372p, up from 357p in the previous quarter. Liquidity coverage stood at 175.3 percent and the net stable funding ratio was 136.2 percent. With £6.9 billion in MREL-compliant issuances during the quarter and wholesale funding at £195.6 billion, Barclays remains well-capitalised with a stable funding structure and liquidity surplus exceeding £132 billion.

How Are Investors Reacting to Barclays’ Performance?

Investor sentiment toward Barclays has turned increasingly positive following the Q1 2025 earnings release. Institutional investors welcomed the raised full-year income guidance, stronger-than-expected RoTE, and confirmation of long-term capital return goals. Barclays stock witnessed modest appreciation in the days following the announcement, reflecting renewed investor confidence amid a broader rotation back into UK financials.

Institutional flows into Barclays have increased, particularly from European mutual funds and UK pension funds seeking exposure to high-yielding value stocks. Equity analysts interpreted the reaffirmation of the £10 billion capital return plan between 2024 and 2026 as a key signal of management discipline and balance sheet strength. The Group’s current price-to-book ratio remains below 0.7x, which alongside a dividend yield above 6 percent, continues to attract value investors. Retail investor sentiment has also improved, aided by consistent earnings visibility and strong dividend support.

What Are Analysts Saying—Buy, Sell, or Hold?

The consensus among analysts has shifted from a cautious hold in late 2024 to a more favourable moderate buy in 2025. Buy-rated views are based on Barclays’ attractive valuation, diversified earnings mix, and structural cost-saving progress. The 14 percent RoTE delivered in Q1 exceeded expectations and is above most domestic and European peers. Analysts in this camp argue that the stock remains underpriced given its capital strength and recurring profitability. Those advocating a hold rating are awaiting further clarity on U.S. consumer credit trends and tangible delivery on the bank’s transformation roadmap. While very few sell-side calls exist at this stage, some bearish voices cite macro risks such as UK inflation persistence, geopolitical uncertainties, or regulatory headwinds that could pressure margins or impairments.

What Is the Outlook for Barclays for 2025 and Beyond?

Barclays upgraded its Group net interest income forecast for 2025 to above £12.5 billion, excluding the Investment Bank and Head Office, compared with earlier guidance of £12.2 billion. For Barclays UK alone, NII is now expected to exceed £7.6 billion. Management reaffirmed its target RoTE of approximately 11 percent for FY25, with a cost-to-income ratio of around 61 percent. Looking ahead to FY26, Barclays aims to deliver a RoTE above 12 percent, supported by Group income of approximately £30 billion and operating expenses of around £17 billion. The CET1 target range remains unchanged at 13 to 14 percent.

Analysts expect Barclays to sustain its performance momentum via increased investment in digital transformation, continued simplification of the business model, and selective expansion in fee-based private banking. Opportunities may also emerge from further M&A activity in wealth and asset management, as the Group consolidates its position across key European and international markets. If macroeconomic conditions remain broadly stable and credit metrics hold, Barclays could continue outperforming within the UK financial services sector.