As good as it gets? Banking the benefits of above-budget IB revenues

Research evidence excerpt

As good as it gets? Banking the benefits of above-budget IB revenues

In the event a 7% PPP beat in the IB was largely offset by misses in Barclays UK (NIM

down QoQ, 3% lower PPP), UK Corporate Bank(-1%), Private Bank & Wealth

Management (2%) and UK Consumer Bank (-6%).

The outlook

Barclays FY26 income guide increased £500m to £13.5bn with the high fifties cost/

income target retained. With consensus at £13.24bn this implies an additional £0.25bn

to market income forecasts - effectively just adding in the 2Q26 beat - which at the 58%

existing consensus cost/income forecast means ~£105m in higher profits (£0.25bn at

42% retained), a 1% upgrade to indicated expectations.

Figure 3: Barclays 2026 and 2028 targets

Barclay s 2026 and 2 028 targets

Source: Company data, UBS

The key issue on the day: Operating leverage

Barclays guided to a £500m HoH increase in restructuring costs (‘strategic cost actions’)

in 2H26 and £100-150m in expenses from a planned change to comp structure (lower

fixed comp, larger deferreds but vesting over a shorter period of time, driven by recent

regulatory change).

If we assume that consensus had the ‘normal’ half year SCA run rate of £150m in 2H this

implies the need to add £500m to the 1H cost run rate (£600m guided SCA - £100m

booked in 1H - £150m in 2H consensus + £150m comp costs). That's equal to the

£0.5bn in guided revenues and twice the indicated £0.25bn increase to consensus

earnings: showing no real current year operating leverage to a very strong operating

environment.

Figure 4: Allocating additional SCA spend to divisions is a challenge, as is

tracking delivery. Should deliver a 6% YoY tailwind to FY27 PPP, 7% incl. the

£100-150m non-recurring compensation true up cost

a challen

dditi SCA spend sions ge, as i