RBC analysts have raised profit forecasts for Barclays PLC (LSE:BARC), suggesting structural hedge income is expected to be higher than previously thought following second-quarter results.
Profit before tax is now expected to sit at £9.3 billion for 2025, against a previous forecast of £8.8 billion, RBC said in a note on Tuesday.
This comes after Barclays updated on its risk management strategy in results last week, which RBC said had not been accounted for.
“We now assume that the bank has been using a combination of 3-year and 7-year swaps on its product hedge,” RBC said, with these used to shield against interest rate changes.
“This, along with a lower notional reduction assumption, has led to an increase in our structural hedge income estimates.”
Structural hedge income is now expected to sit at £4.8 billion in 2024, before rising to £5.9 billion and £6.2 billion throughout 2025 and 2026 respectively, according to RBC.
This in turn will likely drive operating income, RBC said, adding to better-than-expected net interest rate margin forecasts within Barclays’ UK division.
RBC hiked Barclays’ share price target as a result, by 8% to 270p, which marks a prospective 31% gain on Monday’s close.