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Barclays (BCS) Q1 Earnings Improve on Higher Fee Income
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Barclays PLC’s (BCS - Free Report) first-quarter 2017 net income from continuing operations was £1.21 billion ($1.50 billion), which more than doubled from £545 million recorded in the prior-year quarter. Likewise, pre-tax earnings of £1.68 billion ($2.08 billion) jumped from £793 million in the year-ago quarter.
In the pre-market trading, Barclays was down nearly 4.7% on the NYSE, perhaps due to surprisingly dismal trading performance in the reported quarter. Notably, the actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Encouraging underwriting performance and significant drop in losses in Non-Core division were the primary reasons for the drastically improved results. Also, driven by the success of its streamlining efforts and lower legal costs, Barclays reported a fall in operating expenses. However, an unexpected fall in trading revenues, lower net interest income and rise in credit impairment charges were the undermining factors.
Attributable profit for the quarter was £190 million ($235.3 million), down 56% year over year. The decline was due to loss with respect to discontinued operations.
Revenues Improve, Costs Decline
Net operating income was £5.3 billion ($6.56 billion), up 15% year over year. Rise reflected higher net fee, commission and other income, partly offset by a decline in net interest income.
Operating expenses totaled £3.62 billion ($4.48 billion), down 5% from the year-ago quarter. This reflected lower litigation charges and a significant fall in Non-Core expenses.
Cost to income ratio was 62%, down from 76% in the year-ago period.
Credit impairment charges increased 19% from the prior-year quarter to £527 million ($652.5 million). The rise reflected increase in Consumer, Cards and payments operation mainly due to a change in portfolio mix.
Segmental Performance
Barclays UK: Profit before tax came in at £708 million ($876.6 million), up marginally on a year-over-year basis. A rise in net operating income was almost offset by higher operating expenses.
Barclays International: Profit before tax came in at £1.36 billion ($1.68 billion), surging 32% year over year. The increase was driven by improvement in Corporate and Investment Bank, and Consumer, Cards and Payments divisions.
Head Office: Profit before loss was £141 million ($174.6 million) against loss-before tax of £123 million in the prior-year period.
Barclays Non-Core: Loss before tax amounted to £241 million ($298.4 million), narrower than a loss of £815 million incurred in the year-ago period. The company remains on track to close the division on Jun 30, 2017.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2017 came in at £1,203.8 billion ($1,499.14 billion), down nearly 1% from the Dec 31, 2016 level. As of Mar 31, 2017, Common Equity Tier 1 ratio was 12.5%, up from 11.3% as of Mar 31, 2016.
Total risk-weighted assets were £360.9 billion ($449.44 billion) as of Mar 31, 2017.
Our View
We expect Barclays’ diversified business model and sound financial position to consistently support its overall growth in the future. Further, the bank’s expense reduction and restructuring initiatives are expected to improve profitability over the long term. However, tepid global economic recovery and a stringent regulatory landscape will continue to weigh on the company’s near-term performance.
Among other foreign banks, Itau Unibanco Holding S.A. (ITUB - Free Report) , HSBC Holdings plc (HSBC - Free Report) and Mitsubishi UFJ Financial Group, Inc. are scheduled to report results on May 3, May 4 and May 15, respectively.
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Barclays (BCS) Q1 Earnings Improve on Higher Fee Income
Barclays PLC’s (BCS - Free Report) first-quarter 2017 net income from continuing operations was £1.21 billion ($1.50 billion), which more than doubled from £545 million recorded in the prior-year quarter. Likewise, pre-tax earnings of £1.68 billion ($2.08 billion) jumped from £793 million in the year-ago quarter.
In the pre-market trading, Barclays was down nearly 4.7% on the NYSE, perhaps due to surprisingly dismal trading performance in the reported quarter. Notably, the actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Encouraging underwriting performance and significant drop in losses in Non-Core division were the primary reasons for the drastically improved results. Also, driven by the success of its streamlining efforts and lower legal costs, Barclays reported a fall in operating expenses. However, an unexpected fall in trading revenues, lower net interest income and rise in credit impairment charges were the undermining factors.
Attributable profit for the quarter was £190 million ($235.3 million), down 56% year over year. The decline was due to loss with respect to discontinued operations.
Revenues Improve, Costs Decline
Net operating income was £5.3 billion ($6.56 billion), up 15% year over year. Rise reflected higher net fee, commission and other income, partly offset by a decline in net interest income.
Operating expenses totaled £3.62 billion ($4.48 billion), down 5% from the year-ago quarter. This reflected lower litigation charges and a significant fall in Non-Core expenses.
Cost to income ratio was 62%, down from 76% in the year-ago period.
Credit impairment charges increased 19% from the prior-year quarter to £527 million ($652.5 million). The rise reflected increase in Consumer, Cards and payments operation mainly due to a change in portfolio mix.
Segmental Performance
Barclays UK: Profit before tax came in at £708 million ($876.6 million), up marginally on a year-over-year basis. A rise in net operating income was almost offset by higher operating expenses.
Barclays International: Profit before tax came in at £1.36 billion ($1.68 billion), surging 32% year over year. The increase was driven by improvement in Corporate and Investment Bank, and Consumer, Cards and Payments divisions.
Head Office: Profit before loss was £141 million ($174.6 million) against loss-before tax of £123 million in the prior-year period.
Barclays Non-Core: Loss before tax amounted to £241 million ($298.4 million), narrower than a loss of £815 million incurred in the year-ago period. The company remains on track to close the division on Jun 30, 2017.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2017 came in at £1,203.8 billion ($1,499.14 billion), down nearly 1% from the Dec 31, 2016 level. As of Mar 31, 2017, Common Equity Tier 1 ratio was 12.5%, up from 11.3% as of Mar 31, 2016.
Total risk-weighted assets were £360.9 billion ($449.44 billion) as of Mar 31, 2017.
Our View
We expect Barclays’ diversified business model and sound financial position to consistently support its overall growth in the future. Further, the bank’s expense reduction and restructuring initiatives are expected to improve profitability over the long term. However, tepid global economic recovery and a stringent regulatory landscape will continue to weigh on the company’s near-term performance.
Barclays PLC Price, Consensus and EPS Surprise
Barclays PLC Price, Consensus and EPS Surprise | Barclays PLC Quote
Barclays currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other foreign banks, Itau Unibanco Holding S.A. (ITUB - Free Report) , HSBC Holdings plc (HSBC - Free Report) and Mitsubishi UFJ Financial Group, Inc. are scheduled to report results on May 3, May 4 and May 15, respectively.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>