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Barclays (BCS) Q1 Earnings Improve, Revenues & Costs Down
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Barclays (BCS - Free Report) reported first-quarter 2019 net income attributable to ordinary equity holders of £1.04billion ($1.36 billion). This reflects improvement from net loss of £764 million ($1.01 billion) incurred in the prior-year quarter.
Shares of Barclays on the NYSE declined nearly 2.7% in pre-market trading. Nonetheless, a full day trading will provide a better picture.
Results reflect lower operating expenses and a strong balance sheet position. However, a decline in net operating income and higher credit impairment charges were the headwinds.
Revenues & Costs Decline
Net operating income was £4.80 billion ($6.25 billion), down 5%from the prior-year quarter. The decline was mainly due to lower net fee, commission and other income.
Operating expenses (excluding litigation and conduct costs) totaled £3.26 billion ($4.25 billion), down 3% from the year-ago quarter.
Cost to income ratio was 63%, down from 99%.
Credit impairment charges jumped 56% to £448 million ($583.7 million).
Pre-tax income was £1.48billion ($1.93 billion) against pre-tax loss of £236 million ($310.7 million) in the year-ago quarter.
Segmental Performance
Barclays U.K.: Profit before tax was £585 million ($762.2 million), up significantly from £170 million ($223.8 million) in the year-ago quarter. Stable net operating income and lower operating expenses supported the segment’s performance.
Barclays International: Profit before tax was £1.12billion ($1.46 billion), down 21% from the prior-year quarter. The fall was mainly due weak performance in corporate and investment bank division.
Head Office: Loss before tax was £220 million ($286.6 million), narrower than loss of £1.82 billion ($2.40 billion) in the prior-year quarter.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2019, were £1,193.5 billion ($1,554.2 billion), up 5% sequentially.
As of Mar 31, 2019, Common Equity Tier 1 ratio was 13.0%, up from 12.7% on Mar 31, 2018.
Total risk-weighted assets were £319.7 billion ($416.3 billion) as of Mar 31, 2019.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Operating expenses (excluding litigation and conduct charges) are expected to be £13.6-£13.9 billion in 2019. In case the challenging operating backdrop persists, management expects to reduce costs below £13.6 billion.
Our View
Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify operations by divesting non-core businesses are commendable.
Deutsche Bank (DB - Free Report) , HSBC Holdings (HSBC - Free Report) and Bank of Montreal (BMO - Free Report) are slated to report results on Apr 26, May 3 and May 29, respectively.
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Image: Bigstock
Barclays (BCS) Q1 Earnings Improve, Revenues & Costs Down
Barclays (BCS - Free Report) reported first-quarter 2019 net income attributable to ordinary equity holders of £1.04billion ($1.36 billion). This reflects improvement from net loss of £764 million ($1.01 billion) incurred in the prior-year quarter.
Shares of Barclays on the NYSE declined nearly 2.7% in pre-market trading. Nonetheless, a full day trading will provide a better picture.
Results reflect lower operating expenses and a strong balance sheet position. However, a decline in net operating income and higher credit impairment charges were the headwinds.
Revenues & Costs Decline
Net operating income was £4.80 billion ($6.25 billion), down 5%from the prior-year quarter. The decline was mainly due to lower net fee, commission and other income.
Operating expenses (excluding litigation and conduct costs) totaled £3.26 billion ($4.25 billion), down 3% from the year-ago quarter.
Cost to income ratio was 63%, down from 99%.
Credit impairment charges jumped 56% to £448 million ($583.7 million).
Pre-tax income was £1.48billion ($1.93 billion) against pre-tax loss of £236 million ($310.7 million) in the year-ago quarter.
Segmental Performance
Barclays U.K.: Profit before tax was £585 million ($762.2 million), up significantly from £170 million ($223.8 million) in the year-ago quarter. Stable net operating income and lower operating expenses supported the segment’s performance.
Barclays International: Profit before tax was £1.12billion ($1.46 billion), down 21% from the prior-year quarter. The fall was mainly due weak performance in corporate and investment bank division.
Head Office: Loss before tax was £220 million ($286.6 million), narrower than loss of £1.82 billion ($2.40 billion) in the prior-year quarter.
Strong Balance Sheet and Capital Ratios
Total assets as of Mar 31, 2019, were £1,193.5 billion ($1,554.2 billion), up 5% sequentially.
As of Mar 31, 2019, Common Equity Tier 1 ratio was 13.0%, up from 12.7% on Mar 31, 2018.
Total risk-weighted assets were £319.7 billion ($416.3 billion) as of Mar 31, 2019.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Operating expenses (excluding litigation and conduct charges) are expected to be £13.6-£13.9 billion in 2019. In case the challenging operating backdrop persists, management expects to reduce costs below £13.6 billion.
Our View
Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify 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.
Earnings Release Dates of Other Foreign Banks
Deutsche Bank (DB - Free Report) , HSBC Holdings (HSBC - Free Report) and Bank of Montreal (BMO - Free Report) are slated to report results on Apr 26, May 3 and May 29, respectively.
Radical New Technology Creates $12.3 Trillion Opportunity
Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.
Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.
See the 7 breakthrough stocks now>>