It has been a while since Barclays PLC's (LSE:BARC) American consumer business offered much to get excited about. But in the space of a week, the bank has changed the tone.
Citi, which had previously been cautious on the division, now says the story looks far more credible.
The first surprise came with the third-quarter results, which saw net interest margin, the difference between what the bank earns on loans and pays on deposits, come in stronger than expected.
That was helped by repricing moves, growth in higher-margin retail partners and cheaper deposits from retail customers.
In plain English, Barclays is earning more from its lending without paying much extra to fund it.
Then came the real shift in perception: yesterday's acquisition of Best Egg, a US digital consumer finance platform.
Citi calls it a “sensible, return-on-equity accretive transaction”, meaning it should lift profitability rather than dilute it.
The deal adds scale, data and a customer base of around a million borrowers, mostly prime and near-prime. For Barclays’ US arm, that represents a meaningful step up.
The American investment bank has reworked its numbers. It now expects profit before tax in the US consumer business to rise by about 15 per cent and group earnings per share to increase by about 1%.
That brings forecasts broadly in line with market consensus for 2027, a sharp change from its earlier downbeat view. More importantly, the analysts believe the division’s target of a return on tangible equity above 12% now looks achievable, even if mid-teens returns remain a stretch.
Execution and integration risks remain. Best Egg focuses on unsecured personal loans, a segment that can sour quickly if credit conditions tighten.
But Citi’s tone suggests Barclays has earned some benefit of the doubt. For a business long seen as the group’s underperformer, that is a notable turnaround.