Assessing the Impact of Trump's 10% Credit Card Interest Rate Cap on Barclays and Global Banking Profits

The proposed 10% credit card interest rate cap under the Trump administration has sparked significant debate among investors and financial institutions. For Barclays, a global banking giant with a substantial credit card portfolio, the policy could reshape its earnings resilience and strategic risk profile. This analysis evaluates Barclays' exposure to the cap, leveraging its 2024 financial performance and broader industry trends, to determine how the bank-and the sector at large-might adapt.

Barclays' Current Financial Position and Credit Card Exposure

Barclays reported total revenue of £24.3 billion in 2024, a 3.2% increase from 2023, with a profit margin of 22%-up from 18% the prior year. While the bank's annual report does not disclose granular credit card segment figures, indirect indicators suggest the division plays a critical role. For instance, the investment banking segment alone contributed nearly half of Barclays' £26.8 billion in 2024 income, implying that credit card operations likely form a significant portion of the remaining revenue.

The bank's cost-income ratio, a key metric for operational efficiency, improved to 56% in Q1 2025, down from 62% in 2024 and 67% in 2023. This suggests Barclays has prioritized cost-cutting, which could buffer against margin compression from the interest rate cap. However, the lack of transparency around credit card-specific financials complicates precise risk quantification.

Strategic Risk: Margin Compression and Revenue Diversification

A 10% interest rate cap would directly pressure Barclays' credit card margins, which rely heavily on interchange fees and interest income. In 2024, the private banking and wealth management division saw a 13% decline in attributable profit to £288 million, despite a lower cost-income ratio of 75% in Q4. This highlights vulnerabilities in segments reliant on fee-based income, which could mirror credit card operations under regulatory stress.

Barclays' recent sale of $1.1 billion in credit card receivables to Blackstone's Credit & Insurance segment further underscores its efforts to reduce exposure to interest rate volatility. By securitizing receivables, the bank may mitigate direct losses from the cap while maintaining lending capacity. However, this strategy could also signal a long-term shift away from high-margin credit card operations.

Earnings Resilience: Efficiency Gains and Diversification

Barclays' 2024 performance demonstrates its capacity to adapt. The bank achieved £1 billion in cost savings through operational efficiencies, with plans to reach £2 billion by 2026. A cost-income ratio in the "high 50s" (as targeted by management) would significantly enhance resilience against margin erosion. Additionally, the investment banking division's robust 2024 performance-driven by strong fixed-income trading-provides a counterbalance to potential credit card losses.

Globally, the cap could force banks to innovate in fee structures or expand into higher-margin services, such as wealth management or digital banking. Barclays' 2024 focus on private banking, despite its 13% profit decline, suggests a strategic pivot toward diversified revenue streams.

Global Banking Implications

The Trump administration's cap would not isolate Barclays but could trigger a sector-wide recalibration. Banks reliant on credit card income-such as Capital One or American Express-may face similar margin pressures. However, institutions with diversified portfolios and strong cost controls, like Barclays, are better positioned to absorb shocks. The cap could also accelerate industry consolidation, as smaller players struggle to offset lost revenue.

Conclusion

While the 10% interest rate cap poses a clear risk to Barclays' credit card margins, the bank's 2024 financial performance and strategic initiatives-cost-cutting, securitization, and diversification-suggest a resilient response. Investors should monitor how the bank balances its credit card exposure with growth in investment banking and wealth management. For the broader sector, the policy underscores the need for agility in a regulatory landscape increasingly shaped by political agendas.