KBRA Upgrades Ratings for Barclays Bank PLC

8 Aug 2023   |   Dublin


KBRA Europe (KBRA) upgrades the deposit and senior unsecured debt ratings to A+ from A and affirms the short-term deposit and debt ratings of K1 for Barclays Bank PLC, a subsidiary of Barclays PLC (LON: BARC) (“Barclays”), an international financial institution. The Outlook for the long-term ratings is Stable.

This credit rating is an unsolicited credit rating
With Rated Entity or Related Third-Party ParticipationYes
With Access to Internal DocumentsNo
With Access to ManagementNo

Key Credit Considerations

The rating upgrade is driven by KBRA’s view that Barclays is well positioned to deliver higher and more sustainable earnings over the cycle than in the past. After undergoing a multi-year restructuring program, a higher performing and more resilient institution has emerged. The group’s earnings power provides it with resources to comfortably cover a potential rise in asset quality problems, given what could be a more difficult environment going forward. Improved financial performance and resilience also enhance Barclays’ capability to absorb any further extraordinary charges, although KBRA does not expect the size and frequency of such charges to continue. Barclays’ diversified business model, with strong franchises in retail, commercial banking and selected investment banking businesses in the UK and US, has proven to perform well against a challenging economic and geopolitical backdrop since the pandemic. The group's sound capitalisation, strong liquidity and healthy asset quality also support the ratings. Barclays’ solid funding profile benefits from its strong deposit base but there is considerable reliance on wholesale funding for investment banking operations. Asset quality is sound but likely to weaken given the challenging macroeconomic environment with high interest rates and inflationary pressures that negatively impact customers’ affordability. That said, KBRA expects the deterioration to be manageable due to the group’s conservative underwriting standards and prudent provisioning level. The ratings are constrained by a significant portion of Barclays’ earnings coming from investment banking activities which are fundamentally more volatile and can pose considerable risk management challenges.

Rating Sensitivities

A rating upgrade is not expected in the near term. However, a sustained improvement in earnings, while maintaining healthy asset quality and strong capital could potentially facilitate additional positive rating momentum over time. A rating downgrade is unlikely in the near term, though a severe and/or prolonged setback in the economic recovery or material weaknesses in risk management leading to a substantial deterioration in asset quality, earnings, or capital, may result in negative rating action. The ratings are also sensitive to the economic impact of Brexit.

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