Barclays profits up 12% as UK banks brace for tax increase in budget

Barclays reported £2.3bn in pre-tax profit for July to September, up from £2.1bn a year earlier. The result shows the bank remained highly profitable despite pressure over household bills and calls for higher bank taxes. It also created room for another payment to shareholders.

The £500m share buyback means Barclays will spend that amount buying its own shares from investors. This reduces the number of shares available and returns cash to shareholders who sell. Chief executive CS Venkatakrishnan announced the buyback alongside the quarterly results. It is separate from ordinary dividends, although both are ways of rewarding investors.

The announcement comes just before the 28 October budget, when the government is expected to raise taxes on banks. Barclays has already returned £2.8bn through buybacks and dividends since January. Its stronger profits may increase political pressure to contribute more tax, even as the bank continues rewarding shareholders.

Barclays’ pre-tax profit reached £2.3bn in the July-to-September quarter. That was 12% higher than the £2.1bn recorded during the same period last year. The increase matters because it shows the bank’s earnings strengthened while politicians and campaigners were debating whether lenders should pay more tax.

The difference between the two quarterly profit figures is £200m. Barclays also announced a new £500m share buyback. In a buyback, a company uses cash to purchase some of its own shares from investors. Along with dividends, this is a direct way to return profits or excess capital to shareholders.

The total returned since January is £2.8bn. That figure includes both buybacks and dividends, rather than the new buyback alone. The timing is significant: the announcement comes days before the 28 October budget, which is expected to include a higher tax charge on banks.

Net interest income is the difference between interest a bank receives from borrowers and interest it pays to people or organisations holding deposits. The article describes it as loan charges minus deposit payments. It shows how much a bank earns from the basic business of taking in money and lending it out.

Barclays’ UK retail banking net interest income rose 6% to £2bn. For example, if a bank receives more interest from mortgages and loans than it pays on savings accounts, the remaining amount contributes to net interest income. The bank must still cover staff, technology, bad debts and other costs before it reaches overall profit.

This measure matters because it is closely linked to interest rates and can move quickly when borrowing and saving rates change. Barclays’ rise helped support its quarterly result. It has also become politically sensitive because campaigners connect stronger bank income with mortgage pressure on households and demands for higher taxes.

Banks earn a spread when the interest charged on loans exceeds the interest paid on deposits. When rates rise, loan rates can increase, especially on variable or newly issued borrowing. Deposit rates may rise too, but not necessarily by the same amount or at the same speed. That difference can widen net interest income.

For example, a bank might charge more on mortgages after rates rise while continuing to pay relatively modest interest on some current accounts. Its interest income increases faster than its deposit costs. The gap is not guaranteed, because banks compete for savings and may raise deposit rates to retain customers. Loan defaults and weaker borrowing demand can also reduce the benefit.

The article says Barclays’ UK retail net interest income increased 6% to £2bn and is linked to interest rates. It also says rates have been rising as the Iran war increased inflation expectations. That stronger income has helped profits but intensified calls for banks to pay more tax.

A higher bank tax would transfer more of lenders’ profits to the government. That could reduce the money banks have available for dividends, share buybacks, investment or building financial buffers. Shareholders could therefore receive less, although the exact effect would depend on the tax and how each bank responds.

Banks could try to absorb the charge, or pass some of its cost through higher borrowing rates, lower deposit rates or other fees. For example, a bank facing a smaller after-tax return might reduce shareholder distributions rather than change customer prices. The article does not specify the proposed tax rate or its detailed design, so the precise effects remain uncertain.

The political pressure is clear. Barclays reported £2.3bn in quarterly pre-tax profit and announced £500m of buybacks before the budget. Campaigners argue lenders can contribute more while households struggle with bills. The government expects higher taxes to raise revenue, but customers and investors could share some consequences.

The government is seeking more revenue because it wants to help fund cost of living support programmes. The proposed bank tax increase is being considered as the 28 October budget approaches. The article presents profitable banks as a possible source of additional public money during financial pressure on households and businesses.

The Trades Union Congress argues that banks should contribute more because their profits have grown while many people face household bills and mortgage misery. Paul Nowak said Britain’s big four banks had made £200bn in profit since 2021. This figure is used to support the case that lenders can afford a larger tax contribution.

The extra revenue would help support households and businesses through what the TUC calls a looming energy bill crunch. The government has not yet set out the detailed tax measure in the article. The budget is due on 28 October, so the next step is the chancellor’s announcement and any explanation of how the money will be used.

Banks take deposits from customers and pay them interest, or provide account services. They then lend much of that money through products such as mortgages and other loans, charging borrowers interest. The difference between income from lending and the cost of deposits is net interest income, a central part of banking revenue.

For example, if a bank receives £6 in interest from loans for every £100 lent but pays £3 to depositors, the £3 difference contributes to its income. The bank must manage the risk that borrowers miss payments or default. It also needs enough deposits and other funding to meet withdrawals and continue lending. Careful pricing and risk controls protect the gap.

Barclays’ UK retail banking net interest income rose 6% to £2bn. The article links this income to interest rates, which have been rising as inflation expectations increased. Stronger lending income helped Barclays report £2.3bn in quarterly pre-tax profit, but it also brought greater scrutiny from tax campaigners.