The FTSE 100‘s full of extraordinary stories. But few are quite as dramatic as Barclays (LSE:BARC) right now.
The bank’s surged over 200% in five years and 58% in the last 12 months alone, vaulting it into the top-10 largest UK companies on the entire London Stock Exchange with a market-cap of £71.5bn.
But what’s behind this remarkable run? And, more importantly, can it continue?
Barclays’ secret weapon
The single biggest driver behind Barclays’ resurgence isn’t flashy investment banking deals or a booming UK housing market. It’s something far more technical: the structural hedge.
In simple terms, Barclays holds a large portfolio of fixed-rate assets funded by customer deposits. When interest rates rose sharply after 2022, the bank locked in attractive returns on those deposits by entering interest rate swap contracts, locking in these favourable rates for several years to come.
The mechanics behind this strategy are rather technical. But the result has been a growing stream of guaranteed net interest income that flows through even as the Bank of England began cutting interest rates. And even after several years, these hedges continue to work their magic.
In the first quarter of 2026 alone, gross structural hedge contributions reached £1.66bn, up from £1.34bn a year earlier. That rising tide has powered Barclays UK’s net interest margin up to 3.72%, its highest level in years.
And in the words of Barclays’ CEO: “The breadth and quality of our businesses mean we remain confident in delivering all our financial targets across a range of environments”.
Can the good times last?
However, not everything in the results was pristine. Credit impairment charges jumped to £823m from £643m a year earlier, partly due to a £228m single-name charge in the Investment Bank arm. As a result, the full-year loan loss rate’s now expected to land around the top of the 50-60 basis point guidance range.
That’s a modest but notable deterioration and suggests that the pressure of higher interest rates on customers is starting to take a toll.
Then there’s the ongoing motor finance scandal in the UK that seemingly refuses to go away. But compared to other UK financial institutions, Barclays’ exposure’s relatively limited.
Nevertheless, management’s now put aside £430m to cover expected compensation claims. And if the scope of the FCA’s redress scheme expands further, the bank could find it far more challenging to hit its 14%+ return on tangible equity target by 2028.
So with all that said, what should investors make of this bank stock in July?
A top FTSE 100 stock to consider?
Barclays’ structural hedges won’t last forever. However, with the UK economy shifting towards a ‘higher-for-longer’ interest rate environment, the good times could be set to continue, and management able to benefit far longer than originally anticipated.
And with a relentless buyback scheme helping to push the share price higher, Barclays’ shares might be worth thinking about even with its outstanding risk factors. But it’s not the only FTSE 100 stock that looks attractive to me right now…
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Zaven Boyrazian does not hold any positions in the companies mentioned.
