*

Bank launches surprise buyback on robust income, cost

savings

*

Fresh motor finance provisions and investment bank credit

exposure weigh on profit

*

Investment bank income up 8%, undershooting Wall Street

rivals

(Updates share price performance, adds league table rankings in

paragraphs 13-14)

By Lawrence White

LONDON, Oct 22 (Reuters) - Barclays ( BCS ) announced a

surprise share buyback and upgraded a key profitability target

for the year, as confidence in its income and cost-cutting

progress outweighed fresh provisions and underperformance in its

investment bank.

The British bank set aside another 235 million pounds to

cover a motor finance mis-selling scandal and said it had taken

a 110 million pound charge on the collapse of U.S. firm

Tricolor, one of several bankruptcies that triggered wider

concerns about banks' exposure to private credit markets.

Shares in Barclays ( BCS ) rose 4% in early Wednesday trading as

investors welcomed the 500 million pound ($670 million) buyback.

BUYBACK CHEER, BUT INVESTMENT BANK UNDERWHELMS

Barclays ( BCS ) said it would move to quarterly buyback

announcements and now aimed to make a return on equity above 11%

this year rather than reaching that figure, thanks to better

than expected income and faster implementation of cost savings

plans.

That allowed it to bring forward plans to distribute excess

capital to shareholders, CEO C.S. Venkatakrishnan said in the

update.

"We have been robustly and consistently generating capital

for our shareholders consecutively over the last nine quarters,"

he said.

Barclays ( BCS ) reported a 7% drop in third-quarter pretax profit

to 2.1 billion pounds, in line with analysts' average forecast.

"Barclays' ( BCS ) latest results show a bank quietly outperforming

despite headline noise," said Matt Britzman, senior equity

analyst, Hargreaves Lansdown. If the motor finance provision was

stripped out, profits were 13% ahead of expectations, he noted.

Barclays' ( BCS ) investment bank, however, had a mixed three

months.

Income at the unit grew 8% year-on-year, with its global

markets business rising 15%. But fees from deals fell 2%,

contrasting with Wall Street rivals that showed double-digit

gains as corporate confidence rebounded, driving mergers and

fundraising.

In a media call, Venkatakrishnan said the underperformance

was not because Barclays ( BCS ) was investing too little capital in the

unit, but because the quarter "was dominated by a few large

deals that we were not fortunate enough to be on".

The bank slumped six places to 14th in the ranking for

announced global mergers in the last quarter, according to LSEG

data, and ranks seventh in the year to date behind six U.S.

firms.

A bright spot in the bank's otherwise underwhelming U.S.

performance was its consumer bank business, where income grew

19% thanks to price increases and the acquisition of General

Motors' co ( GM )-branded cards portfolio.

PRIVATE CREDIT EXPOSURE

Concerns are growing about weakening lending standards

including in the private credit market, a less-regulated

industry where companies have borrowed heavily in recent years,

after a number of U.S. firms collapsed.

Venkatakrishnan said Barclays ( BCS ) had no exposure to First

Brands, an auto parts maker that filed for bankruptcy, and had

turned down doing business with it because of concerns about its

financial projections.

Barclays ( BCS ) said exposure to private credit accounted for 20

billion pounds, or 6%, of its overall loans, with 70% of that

exposure in the United States.

($1 = 0.7451 pounds)