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Barclays (BCS - Free Report) reported first-quarter 2022 net income attributable to ordinary equity holders of £1.40 billion ($1.88 billion), down 17.6% from the prior-year quarter.
Results were hurt by a rise in expenses and credit impairment charges. Nevertheless, a rise in revenues aided the results to some extent.
Revenues Improve, Expenses Rise
Net operating income was £6.36 billion ($8.53 billion), up 8.7% year over year. Higher net interest income, and net fee, commission and other income were partly offset by a rise in credit impairment charges.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.59 billion ($4.82 billion), up 1.2% year over year.
Cost-to-income ratio was 63%, up from 61% recorded a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £141 million ($189.1 million), up significantly from the year-ago quarter.
Pre-tax income was £2.23 billion ($2.99 billion), down 6.9% year over year.
Segment Performance Mixed
Barclays UK: Profit before tax was £594 million ($796.7 million), up 29.1% from the year-ago quarter. The rise was driven by an increase in net interest income and net fee, commission and other income, along with lower costs.
Barclays International: Profit before tax was £1.71 billion ($2.29 billion), down 13.1% year over year. The fall was due to the weak performance of the consumer, cards and payments division.
Head Office: Loss before tax was £73 million ($97.9 million), wider than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Mar 31, 2022, were £1,496.1 billion ($1,964.8 billion), up 8.1% from the prior-quarter end.
Total risk-weighted assets increased 4.7% from the prior quarter to £328.8 billion ($431.8 billion) as of Mar 31, 2022.
As of Mar 31, 2022, the Common Equity Tier 1 (CET1) ratio was 13.8%, down from 15.1% as of Dec 31, 2021.
Guidance
Management expects impairment charges in 2022 to remain below the pre-COVID pandemic levels, given reduced unsecured lending balances and appropriate coverage ratios.
Given the current expectations for inflation and performance costs, 2022 operating expenses are expected to be £15 billion.
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% in 2022 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.
Deutsche Bank (DB - Free Report) reported first-quarter 2022 net income of €1.23 billion ($1.38 billion) compared with the year-ago quarter’s €1.04 billion. Also, DB reported a profit before tax of €1.7 billion ($1.91 billion), up 4% from the year-ago quarter.
Deutsche Bank’s results benefited from higher net revenues and lower expenses. An increase in provision for credit losses was an offsetting factor.
HSBC Holdings (HSBC - Free Report) reported first-quarter 2022 pre-tax profit of $4.2 billion, down 27.9% from $5.8 billion recorded in the prior-year quarter.
HSBC’s results were primarily hurt by a decline in adjusted revenues, partly offset by lower expenses. The expected credit losses and other credit impairment charges (ECL) were a charge in the quarter under review against a release in the prior-year quarter, which was another headwind.
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Barclays (BCS) Q1 Earnings Decline Y/Y, Revenues & Costs Rise
Barclays (BCS - Free Report) reported first-quarter 2022 net income attributable to ordinary equity holders of £1.40 billion ($1.88 billion), down 17.6% from the prior-year quarter.
Results were hurt by a rise in expenses and credit impairment charges. Nevertheless, a rise in revenues aided the results to some extent.
Revenues Improve, Expenses Rise
Net operating income was £6.36 billion ($8.53 billion), up 8.7% year over year. Higher net interest income, and net fee, commission and other income were partly offset by a rise in credit impairment charges.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.59 billion ($4.82 billion), up 1.2% year over year.
Cost-to-income ratio was 63%, up from 61% recorded a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £141 million ($189.1 million), up significantly from the year-ago quarter.
Pre-tax income was £2.23 billion ($2.99 billion), down 6.9% year over year.
Segment Performance Mixed
Barclays UK: Profit before tax was £594 million ($796.7 million), up 29.1% from the year-ago quarter. The rise was driven by an increase in net interest income and net fee, commission and other income, along with lower costs.
Barclays International: Profit before tax was £1.71 billion ($2.29 billion), down 13.1% year over year. The fall was due to the weak performance of the consumer, cards and payments division.
Head Office: Loss before tax was £73 million ($97.9 million), wider than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Mar 31, 2022, were £1,496.1 billion ($1,964.8 billion), up 8.1% from the prior-quarter end.
Total risk-weighted assets increased 4.7% from the prior quarter to £328.8 billion ($431.8 billion) as of Mar 31, 2022.
As of Mar 31, 2022, the Common Equity Tier 1 (CET1) ratio was 13.8%, down from 15.1% as of Dec 31, 2021.
Guidance
Management expects impairment charges in 2022 to remain below the pre-COVID pandemic levels, given reduced unsecured lending balances and appropriate coverage ratios.
Given the current expectations for inflation and performance costs, 2022 operating expenses are expected to be £15 billion.
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% in 2022 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
Deutsche Bank (DB - Free Report) reported first-quarter 2022 net income of €1.23 billion ($1.38 billion) compared with the year-ago quarter’s €1.04 billion. Also, DB reported a profit before tax of €1.7 billion ($1.91 billion), up 4% from the year-ago quarter.
Deutsche Bank’s results benefited from higher net revenues and lower expenses. An increase in provision for credit losses was an offsetting factor.
HSBC Holdings (HSBC - Free Report) reported first-quarter 2022 pre-tax profit of $4.2 billion, down 27.9% from $5.8 billion recorded in the prior-year quarter.
HSBC’s results were primarily hurt by a decline in adjusted revenues, partly offset by lower expenses. The expected credit losses and other credit impairment charges (ECL) were a charge in the quarter under review against a release in the prior-year quarter, which was another headwind.