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Barclays (BCS) Records Y/Y Growth in Q2 Earnings & Revenues

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Barclays (BCS - Free Report) reported second-quarter 2021 net income attributable to ordinary equity holders of £2.11 billion ($2.95 billion), up significantly from the prior-year quarter.

Shares of the company gained 3.9% in pre-market trading. However, the full day’s trading session will likely depict a better picture.

Results were aided by a rise in revenues, partly offset by higher operating expenses. The company recorded credit impairment releases in the quarter, which was a major tailwind.

Revenues Improve, Expenses Rise

Net operating income was £6.21 billion ($8.68 billion), up 67.2% year over year. Barclays recorded a credit impairment release in the reported quarter, which along with a rise in net interest income drove the top line.

Operating expenses (excluding litigation and conduct costs) totaled £3.59 billion ($5.02 billion), up 8.4% year over year.

Cost to income ratio was 67%, up from 62% recorded a year ago.

Credit impairment releases of £797 million ($1.11 billion) were recorded in the second quarter against credit impairment charges recorded in the year-ago quarter.

Pre-tax income was £2.58 billion ($3.61 billion), up significantly year over year.

Segment Performance Solid

Barclays UK: Profit before tax was £1.05 billion ($1.47 billion), up significantly from a loss recorded in the year-ago quarter. The segment recorded a credit impairment release in the quarter along with a higher net operating income.

Barclays International: Profit before tax was £1.87 billion ($2.61 billion), up significantly year over year. The rise was driven by strong performances of both corporate and investment bank, and the consumer, cards and payments divisions.

Head Office: Loss before tax was £338 million ($472.3 million), wider than the loss incurred in the prior-year quarter.

Balance Sheet & Capital Ratios Strong

Total assets as of Jun 30, 2021, were £1,376.3 billion ($1,904.1 billion), down marginally from the previous quarter end.

Total risk-weighted assets declined 2.2% from the prior quarter to £306.4 billion ($423.9 billion) as of Jun 30, 2021.

As of Jun 30, 2021, Common Equity Tier 1 (CET1) ratio was 15.1%, up from 14.6% as of Mar 31, 2021.

Capital Deployment Update

Barclays intends to initiate a share buyback worth up to £500 million in the third quarter of 2021 (in addition to the £700-million buyback completed in April), which would have an impact of 17 basis points on the CET1 ratio.

Also, the company announced a half-year dividend of 2 pence per share. The dividend will be paid out on Sep 17 to shareholders of record as of Aug 13.

2021 Guidance

Barclays expects to deliver a return on tangible equity of more than 10%.

Management projects the quarterly impairment run rate to remain below historical levels, given the reduced unsecured lending balances and the improved macroeconomic outlook.

Expenses (excluding structural cost actions and performance costs) are expected to be in line with 2020. However, due to higher structural cost actions and performance costs, total costs are anticipated to be higher than the 2020 level.

CET1 ratio is expected to be above the target of 13-14%.

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, revenue growth might get hampered in the near term.

Barclays PLC Price, Consensus and EPS Surprise

 

Barclays PLC Price, Consensus and EPS Surprise

Barclays PLC price-consensus-eps-surprise-chart | 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 & Earnings Release Date of Other Foreign Banks

UBS Group AG (UBS - Free Report) reported second-quarter 2021 net profit attributable to shareholders of $2 billion, up 63% from the prior-year quarter. The company’s performance was supported by a 29% year-over-year increase in net fee and commission income along with a 17% rise in net interest income. Net credit loss release was another tailwind.

ICICI Bank’s (IBN - Free Report) first-quarter fiscal 2022 (ended Jun 30, 2021) net income was INR46.16 billion ($621 million), up 78% from the prior-year quarter. Results were driven by a rise in net interest income, non-interest income, and growth in loans and deposits. Provisions declined in the quarter, mainly driven by reserve releases.

HSBC Holdings (HSBC - Free Report) will report quarterly figures on Aug 2.


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