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Barclays (BCS) Records Significant Y/Y Growth in Q4 Earnings
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Barclays (BCS - Free Report) reported fourth-quarter 2021 net income attributable to ordinary equity holders of £1.12 billion ($1.51 billion), up significantly from the prior-year quarter.
Results were aided by a rise in revenues, partly offset by higher operating expenses. The company recorded a credit impairment release in the quarter, which was another major positive.
Revenues Improve, Expenses Rise
Net operating income was £5.19 billion ($6.99 billion), up 16.7% year over year. Higher net interest income was partly offset by a fall in net fee, commission and other income.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.51 billion ($4.73 billion), up 1% year over year.
Cost to income ratio was 72%, down from 77% recorded a year ago.
In the reported quarter, Barclays recorded credit impairment releases of £31 million ($41.8 million) against credit impairment charges recorded in the year-ago quarter.
Pre-tax income was £1.47 billion ($1.98 billion), up significantly year over year.
Segment Performance Solid
Barclays UK: Profit before tax was £514 million ($692.8 million), up 82.3% from the year-ago quarter. The rise was driven by credit impairment releases.
Barclays International: Profit before tax was £1.16 billion ($1.56 billion), up 40.9% year over year. The rise was driven by the strong performances of both corporate and investment bank, and the consumer, cards and payments divisions.
Head Office: Loss before tax was £198 million ($266.9 million), narrower than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2021, were £1,384.3 billion ($1,870.2 billion), down 1.6% from the prior-quarter end.
Total risk-weighted assets increased 2.1% from the prior quarter to £314.1 billion ($424.4 billion) as of Dec 31, 2021.
As of Dec 31, 2021, the Common Equity Tier 1 (CET1) ratio was 15.1%, in line with the Dec 31, 2020 level.
Share Repurchase Update
The company intends to initiate a share buyback of up to £1 billion in the first quarter of 2022.
Guidance
Management expects impairment charges in 2022 to remain below pre-COVID pandemic levels, given reduced unsecured lending balances and an improved macroeconomic outlook.
Expenses for 2022 (excluding structural cost actions and performance costs) are expected to be modestly higher than £12 billion because of inflationary pressures and planned investment spending.
The CET1 ratio in 2022 is expected to be impacted by 80 basis points of regulatory changes, which took effect from Jan 1, 2022. Also, the announced share buyback of up to £1 billion will likely reduce the CET1 ratio by 30 bps.
Over the medium term, the CET1 ratio is expected to be 13-14%.
Barclays expects to deliver a return on tangible equity of more than 10% and a cost-to-income ratio of less than 60% in the medium term.
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.
Mitsubishi UFJ Financial (MUFG - Free Report) reported profits attributable to owners of parent for the third quarter of fiscal 2021 (ended Dec 31) of ¥1.07 billion ($9.42 billion), up 76.3% year over year.
Increased gross profits, higher trust fees, along with net fees, and commissions and decreased credit costs, drove the upside for MUFG. A rise in general and administrative expenses, and a decline in loan and deposit balances acted as headwinds.
Notably, for fiscal 2021 (ending Mar 31, 2022), Mitsubishi expects consolidated profits attributable to owners of parent of ¥1050 billion.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level.
UBS’s performance was affected by higher expenses. Nonetheless, a 9% year-over-year increase in net fee and commission income, along with a 9% rise in net interest income, acted as tailwinds. Net credit loss release was another support.
UBS’s $1.4-billion deal to acquire Wealthfront is expected to accelerate its growth in the United States by strengthening its outreach among affluent investors and bolstering distribution competencies.
HSBC Holdings (HSBC - Free Report) reported fourth-quarter 2021 pre-tax profit of $2.7 billion, up 92.3% from $1.4 billion recorded in the prior-year quarter.
The reported quarter’s results benefited from a rise in adjusted revenues and lower expenses. A decline in the adjusted change in expected credit losses and other credit impairment charges was another positive for HSBC.
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Barclays (BCS) Records Significant Y/Y Growth in Q4 Earnings
Barclays (BCS - Free Report) reported fourth-quarter 2021 net income attributable to ordinary equity holders of £1.12 billion ($1.51 billion), up significantly from the prior-year quarter.
Results were aided by a rise in revenues, partly offset by higher operating expenses. The company recorded a credit impairment release in the quarter, which was another major positive.
Revenues Improve, Expenses Rise
Net operating income was £5.19 billion ($6.99 billion), up 16.7% year over year. Higher net interest income was partly offset by a fall in net fee, commission and other income.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.51 billion ($4.73 billion), up 1% year over year.
Cost to income ratio was 72%, down from 77% recorded a year ago.
In the reported quarter, Barclays recorded credit impairment releases of £31 million ($41.8 million) against credit impairment charges recorded in the year-ago quarter.
Pre-tax income was £1.47 billion ($1.98 billion), up significantly year over year.
Segment Performance Solid
Barclays UK: Profit before tax was £514 million ($692.8 million), up 82.3% from the year-ago quarter. The rise was driven by credit impairment releases.
Barclays International: Profit before tax was £1.16 billion ($1.56 billion), up 40.9% year over year. The rise was driven by the strong performances of both corporate and investment bank, and the consumer, cards and payments divisions.
Head Office: Loss before tax was £198 million ($266.9 million), narrower than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2021, were £1,384.3 billion ($1,870.2 billion), down 1.6% from the prior-quarter end.
Total risk-weighted assets increased 2.1% from the prior quarter to £314.1 billion ($424.4 billion) as of Dec 31, 2021.
As of Dec 31, 2021, the Common Equity Tier 1 (CET1) ratio was 15.1%, in line with the Dec 31, 2020 level.
Share Repurchase Update
The company intends to initiate a share buyback of up to £1 billion in the first quarter of 2022.
Guidance
Management expects impairment charges in 2022 to remain below pre-COVID pandemic levels, given reduced unsecured lending balances and an improved macroeconomic outlook.
Expenses for 2022 (excluding structural cost actions and performance costs) are expected to be modestly higher than £12 billion because of inflationary pressures and planned investment spending.
The CET1 ratio in 2022 is expected to be impacted by 80 basis points of regulatory changes, which took effect from Jan 1, 2022. Also, the announced share buyback of up to £1 billion will likely reduce the CET1 ratio by 30 bps.
Over the medium term, the CET1 ratio is expected to be 13-14%.
Barclays expects to deliver a return on tangible equity of more than 10% and a cost-to-income ratio of less than 60% in the medium term.
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-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 of Other Foreign Banks
Mitsubishi UFJ Financial (MUFG - Free Report) reported profits attributable to owners of parent for the third quarter of fiscal 2021 (ended Dec 31) of ¥1.07 billion ($9.42 billion), up 76.3% year over year.
Increased gross profits, higher trust fees, along with net fees, and commissions and decreased credit costs, drove the upside for MUFG. A rise in general and administrative expenses, and a decline in loan and deposit balances acted as headwinds.
Notably, for fiscal 2021 (ending Mar 31, 2022), Mitsubishi expects consolidated profits attributable to owners of parent of ¥1050 billion.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2021 net profit attributable to shareholders of $1.3 billion, down 18% from the prior-year quarter’s level.
UBS’s performance was affected by higher expenses. Nonetheless, a 9% year-over-year increase in net fee and commission income, along with a 9% rise in net interest income, acted as tailwinds. Net credit loss release was another support.
UBS’s $1.4-billion deal to acquire Wealthfront is expected to accelerate its growth in the United States by strengthening its outreach among affluent investors and bolstering distribution competencies.
HSBC Holdings (HSBC - Free Report) reported fourth-quarter 2021 pre-tax profit of $2.7 billion, up 92.3% from $1.4 billion recorded in the prior-year quarter.
The reported quarter’s results benefited from a rise in adjusted revenues and lower expenses. A decline in the adjusted change in expected credit losses and other credit impairment charges was another positive for HSBC.