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Barclays (BCS) Q4 Earnings Down Y/Y, Resumes Distributions
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Barclays (BCS - Free Report) reported fourth-quarter 2020 net income attributable to ordinary equity holders of £220 million ($290.5 million), down 67.7% from the prior-year quarter.
Shares of the company have lost almost 3% in pre-market trading on dismal quarterly performance. However, the full day’s trading session will likely depict a better picture.
Results were primarily hurt by an increase in operating expenses as well as lower revenues. However, fall in credit impairment charges was a tailwind.
Revenues Decline, Expenses Rise
Net operating income was £4.45 billion ($5.88 billion), down 6.9% year over year. The decline was mainly due to a fall in net interest income.
Operating expenses (excluding litigation and conduct costs, and the U.K. bank levy) totaled £3.48 billion ($4.6 billion), up 5.2%.
Cost to income ratio was 77%, up from 70% recorded a year ago.
Credit impairment charges decreased 5.9% year over year to £492 million ($649.8 million).
Pre-tax income was £646 million ($853.1 million), down 41.1%.
Quarterly Segment Performance Decent
Barclays UK: Profit before tax was £282 million ($372.4 million), down 56.4% from the year-ago quarter. The segment witnessed a fall in net operating income, higher expenses and lower credit impairment charges.
Barclays International: Profit before tax was £822 million ($1.09 billion), up 28.4%. The rise was driven by impressive performance of the corporate and investment bank division.
Head Office: Loss before tax was £458 million ($604.9 million), wider than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2020, were £1,349.5 billion ($1,841.9 billion), down 5.1% sequentially.
Total risk-weighted assets declined 1.4% from the prior quarter to £306.2 billion ($417.9 billion) as of Dec 31, 2020.
As of Dec 31, 2020, Common Equity Tier 1 ratio was 15.1%, up from 13.8% on Dec 31, 2019.
Update on Capital Distributions
Despite the coronavirus-related concerns, Barclays ended 2020 in green. Thus, given the resilient business model, the company plans capital distributions equivalent to 5.0 pence per share to shareholders. This includes dividend of 1 penny per share for 2020 and a share buyback of up to £700 million, which is expected to start in the first quarter of 2021.
Guidance
Barclays expects to deliver meaningful return on tangible equity improvement in 2021 on a year-on-year basis.
Management projects impairment charges to be materially lower from 2020.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to improve in the quarters ahead. However, given the tough operating backdrop and continued uncertainty related to the impact of the coronavirus outbreak, revenue growth is expected to be hampered in the near term.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$5.4 billion ($1 billion) in fourth-quarter 2020, down 26.2% year over year. Including non-recurring items, net income came in at R$7.6 billion ($1.4 billion), up 1.5%.
Deutsche Bank (DB - Free Report) reported fourth-quarter 2020 net income of €189 million ($225.4 million) against the year-ago quarter’s net loss of €1.5 billion. Also, the German lender reported profit before taxes of €175 million ($208.7 million) against a loss of $1.3 billion in the year-ago quarter.
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Barclays (BCS) Q4 Earnings Down Y/Y, Resumes Distributions
Barclays (BCS - Free Report) reported fourth-quarter 2020 net income attributable to ordinary equity holders of £220 million ($290.5 million), down 67.7% from the prior-year quarter.
Shares of the company have lost almost 3% in pre-market trading on dismal quarterly performance. However, the full day’s trading session will likely depict a better picture.
Results were primarily hurt by an increase in operating expenses as well as lower revenues. However, fall in credit impairment charges was a tailwind.
Revenues Decline, Expenses Rise
Net operating income was £4.45 billion ($5.88 billion), down 6.9% year over year. The decline was mainly due to a fall in net interest income.
Operating expenses (excluding litigation and conduct costs, and the U.K. bank levy) totaled £3.48 billion ($4.6 billion), up 5.2%.
Cost to income ratio was 77%, up from 70% recorded a year ago.
Credit impairment charges decreased 5.9% year over year to £492 million ($649.8 million).
Pre-tax income was £646 million ($853.1 million), down 41.1%.
Quarterly Segment Performance Decent
Barclays UK: Profit before tax was £282 million ($372.4 million), down 56.4% from the year-ago quarter. The segment witnessed a fall in net operating income, higher expenses and lower credit impairment charges.
Barclays International: Profit before tax was £822 million ($1.09 billion), up 28.4%. The rise was driven by impressive performance of the corporate and investment bank division.
Head Office: Loss before tax was £458 million ($604.9 million), wider than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2020, were £1,349.5 billion ($1,841.9 billion), down 5.1% sequentially.
Total risk-weighted assets declined 1.4% from the prior quarter to £306.2 billion ($417.9 billion) as of Dec 31, 2020.
As of Dec 31, 2020, Common Equity Tier 1 ratio was 15.1%, up from 13.8% on Dec 31, 2019.
Update on Capital Distributions
Despite the coronavirus-related concerns, Barclays ended 2020 in green. Thus, given the resilient business model, the company plans capital distributions equivalent to 5.0 pence per share to shareholders. This includes dividend of 1 penny per share for 2020 and a share buyback of up to £700 million, which is expected to start in the first quarter of 2021.
Guidance
Barclays expects to deliver meaningful return on tangible equity improvement in 2021 on a year-on-year basis.
Management projects impairment charges to be materially lower from 2020.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to improve in the quarters ahead. However, given the tough operating backdrop and continued uncertainty related to the impact of the coronavirus outbreak, revenue growth is expected to be hampered in the near term.
Barclays PLC Price, Consensus and EPS Surprise
Barclays PLC price-consensus-eps-surprise-chart | Barclays PLC Quote
Currently, Barclays carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
UBS Group AG (UBS - Free Report) reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$5.4 billion ($1 billion) in fourth-quarter 2020, down 26.2% year over year. Including non-recurring items, net income came in at R$7.6 billion ($1.4 billion), up 1.5%.
Deutsche Bank (DB - Free Report) reported fourth-quarter 2020 net income of €189 million ($225.4 million) against the year-ago quarter’s net loss of €1.5 billion. Also, the German lender reported profit before taxes of €175 million ($208.7 million) against a loss of $1.3 billion in the year-ago quarter.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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