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Barclays (BCS) Reports Loss in Q1 on U.S. Litigation Charges
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Barclays (BCS - Free Report) incurred first-quarter 2018 net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the prior-year quarter.
Results for the reported quarter included £1.4 billion charges related to settlement of residential mortgage-backed securities case with the U.S. Department of Justice and charges of £400 million relating to payment protection insurance.
In the pre-market trading, Barclays’ shares declined nearly 1% on the NYSE. The actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Lower expenses, rise in trading income and decline in credit impairment charges supported the results. However, a fall in interest income and muted underwriting fees acted as headwinds. Notably, the bank’s balance sheet position remained strong.
Revenues & Costs Fall
Net operating income was £5.07 billion ($7.06 billion), down 4.3% year over year. The fall reflected lower net interest income.
Operating expenses (excluding U.K. bank levy and litigation and conduct) totaled £3.36 billion ($4.68 billion), declining 6.3% from the year-ago quarter.
Cost to income ratio was 99%, up from 62% in the prior-year quarter.
Credit impairment charges decreased 45.4% from the prior-year quarter to £288 million ($400.8 million).
Pre-tax loss was £236 million ($328.5 million) against pre-tax earnings of £1.68 billion ($2.2 billion) a year ago.
Segment Performance
Barclays U.K.: Profit before tax came in at £170 million ($236.6 million), down 76% from the year-ago quarter. Rise in litigation related costs, operating expenses and impairment charges were the primary reasons for the segment’s dismal performance.
Barclays International: Profit before tax came in at £1.41 billion ($1.96 billion), up 4.2% from the prior-year quarter. The rise was mainly driven by improved corporate and investment bank division performance.
Head Office: Loss before tax was £1.82 billion ($2.53 billion), deteriorating from loss of £141 million ($184 million) in the prior-year period.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2018 came in at £1,142.2 billion ($1,600.9 billion), up nearly 1% sequentially.
As of Mar 31, 2018, Common Equity Tier 1 ratio was 12.7%, down from 13.3% on Dec 31, 2017. The decline was mainly due to the litigation charges incurred during the reported quarter.
Total risk-weighted assets were £317.9 billion ($445.6 billion) as of Mar 31, 2018.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Management expects operating expenses (excluding litigation and conduct charges) to be in the range of £13.6-£13.9 billion in 2019.
The company intends to announce dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.
Our View
Barclays continues to face Pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.
Performance of Other Foreign Bank & Earnings Release Dates
UBS Group AG (UBS - Free Report) reported first-quarter 2018 net profit attributable to shareholders of CHF 1.5 billion ($1.6 billion), up around 19% from the prior-year quarter. Results displayed rise in net fee and commission income (up 3% year over year) and higher net interest income (up 3% year over year). However, the quarter reflected elevated expenses.
The Royal Bank of Scotland Group plc and HSBC Holdings (HSBC - Free Report) are slated to announce results on Apr 27 and May 4, respectively.
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Barclays (BCS) Reports Loss in Q1 on U.S. Litigation Charges
Barclays (BCS - Free Report) incurred first-quarter 2018 net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the prior-year quarter.
Results for the reported quarter included £1.4 billion charges related to settlement of residential mortgage-backed securities case with the U.S. Department of Justice and charges of £400 million relating to payment protection insurance.
In the pre-market trading, Barclays’ shares declined nearly 1% on the NYSE. The actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.
Lower expenses, rise in trading income and decline in credit impairment charges supported the results. However, a fall in interest income and muted underwriting fees acted as headwinds. Notably, the bank’s balance sheet position remained strong.
Revenues & Costs Fall
Net operating income was £5.07 billion ($7.06 billion), down 4.3% year over year. The fall reflected lower net interest income.
Operating expenses (excluding U.K. bank levy and litigation and conduct) totaled £3.36 billion ($4.68 billion), declining 6.3% from the year-ago quarter.
Cost to income ratio was 99%, up from 62% in the prior-year quarter.
Credit impairment charges decreased 45.4% from the prior-year quarter to £288 million ($400.8 million).
Pre-tax loss was £236 million ($328.5 million) against pre-tax earnings of £1.68 billion ($2.2 billion) a year ago.
Segment Performance
Barclays U.K.: Profit before tax came in at £170 million ($236.6 million), down 76% from the year-ago quarter. Rise in litigation related costs, operating expenses and impairment charges were the primary reasons for the segment’s dismal performance.
Barclays International: Profit before tax came in at £1.41 billion ($1.96 billion), up 4.2% from the prior-year quarter. The rise was mainly driven by improved corporate and investment bank division performance.
Head Office: Loss before tax was £1.82 billion ($2.53 billion), deteriorating from loss of £141 million ($184 million) in the prior-year period.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2018 came in at £1,142.2 billion ($1,600.9 billion), up nearly 1% sequentially.
As of Mar 31, 2018, Common Equity Tier 1 ratio was 12.7%, down from 13.3% on Dec 31, 2017. The decline was mainly due to the litigation charges incurred during the reported quarter.
Total risk-weighted assets were £317.9 billion ($445.6 billion) as of Mar 31, 2018.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Management expects operating expenses (excluding litigation and conduct charges) to be in the range of £13.6-£13.9 billion in 2019.
The company intends to announce dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.
Our View
Barclays continues to face Pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.
Barclays PLC Price, Consensus and EPS Surprise
Barclays PLC Price, Consensus and EPS Surprise | Barclays PLC Quote
Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Bank & Earnings Release Dates
UBS Group AG (UBS - Free Report) reported first-quarter 2018 net profit attributable to shareholders of CHF 1.5 billion ($1.6 billion), up around 19% from the prior-year quarter. Results displayed rise in net fee and commission income (up 3% year over year) and higher net interest income (up 3% year over year). However, the quarter reflected elevated expenses.
The Royal Bank of Scotland Group plc and HSBC Holdings (HSBC - Free Report) are slated to announce results on Apr 27 and May 4, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>