Fitch affirms Barclays at ’A’ with stable outlook

Investing.com -- Fitch Ratings has affirmed Barclays (LON:BARC) plc’s Long-Term Issuer Default Rating (IDR) at ’A’ with a Stable Outlook, while maintaining its Viability Rating (VR) at ’a’.

The rating agency also affirmed the Long-Term IDRs of Barclays’ subsidiaries, Barclays Bank plc (BBplc) and Barclays Bank UK PLC (BBUK), at ’A+’, along with their VRs at ’a’. Additionally, Barclays Bank Ireland Plc (BBI) and Barclays Capital Inc. (BCI) had their Long-Term IDRs affirmed at ’A+’ with Stable Outlooks.

Barclays’ ratings reflect its strong positions in UK retail banking, UK and US credit cards, and corporate and investment banking. The bank’s improving profitability benefits from product and geographic diversification, though Fitch notes it remains vulnerable to earnings volatility due to substantial trading and capital market operations.

The VRs of BBplc and BBUK are based on their standalone credit profiles, including regular support from the group. BBUK focuses on domestic retail and SME banking with stable deposit funding, while BBplc houses the corporate and investment banking operations, non-UK consumer banking including a major US credit card business, and private banking activities.

BBplc and BBUK’s Long-Term IDRs and senior debt ratings sit one notch above their VRs and Barclays’ Long-Term IDR, due to large buffers of junior debt that protect senior unsecured creditors.

Asset quality has remained steady, with the gross impaired loan ratio stable at 2.1% in 2024 and at the end of the first quarter of 2025. Fitch expects this ratio to remain broadly unchanged through 2026. Loan impairment charges are projected to stay slightly above the bank’s through-the-cycle loss rate of 50-60 basis points in 2025 before declining in 2026.

Barclays’ operating profitability improved in 2024, with operating profit rising to 2.2% of risk-weighted assets from 1.9% in 2023. Fitch anticipates further improvement in 2025 and 2026 as the bank implements strategic initiatives to boost revenues while controlling costs.

The bank’s 13%-14% common equity Tier 1 ratio target is deemed adequate for its rating, with expectations to operate at the upper end of this range throughout 2025. Improved internal capital generation supports this position despite increased shareholder returns.

Barclays maintains a strong funding profile supported by its UK retail franchise and good market access. The group reported a sound 12-month average liquidity coverage of 175% at the end of the first quarter of 2025.

The ratings could face downward pressure if asset quality deteriorates sharply with the gross impaired loan ratio exceeding 3% for an extended period, or if the CET1 ratio falls below 13% without a clear recovery path. Conversely, an upgrade would require a strengthened business profile with sustained operating profit to risk-weighted assets ratio well above 2% through a full economic cycle.

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