LONDON, Oct 22 (Reuters) - Barclays announced a surprise 500 million pound ($671 million) share buyback, upgraded its performance target for the year and said it would move to quarterly buyback announcements, in a sign of stronger confidence in its income outlook.

Barclays shares rose 4% in premarket.

That came despite a slight fall in third-quarter profit, as the British lender reported pretax profit for the July to September period of 2.077 billion pounds, down from 2.232 billion a year ago and in line with the average of analysts' forecasts of 2.1 billion pounds.

The decline in its quarterly profit was partly driven by an increase in its provision for redress relating to Britain's motor finance scandal of 235 million pounds, bringing its total to 325 million pounds. The bank also said it had a 110 million pound "single name" credit impairment charge in its investment bank.

Barclays said it now aims to make a return on equity of greater than 11% this year, 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.

($1 = 0.7451 pounds)