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Barclays (BCS) Q4 Earnings Down on Higher Costs, Revenues Up
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Barclays (BCS - Free Report) reported fourth-quarter 2022 net income attributable to ordinary equity holders of £1.04 billion ($1.22 billion), down 4% from the prior-year quarter.
Shates of BCS on NYSE tanked 9.7% in pre-market trading on weak quarterly performance.
Barclays’ quarterly results were adversely impacted by higher expenses. Also, the company recorded a substantial year-over-year rise in credit impairment charges. On the other hand, an increase in revenues acted as a tailwind.
Revenues Improve, Expenses Rise
Total income was £5.8 billion ($6.81 billion), up 12% year over year.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.75 billion ($4.4 billion), up 7%.
The cost-to-income ratio was 69%, down from 73% a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £498 million ($584.5 million) against credit impairment releases in the year-ago quarter.
Pre-tax income was £1.31 billion ($1.54 billion), down 8% year over year.
Segment Performance Mixed
Barclays UK: Profit before tax was £667 million ($782.8 million), up 30% from the year-ago quarter. The rise was driven by higher total income.
Barclays International: Profit before tax was £796 million ($934.2 million), down 28% year over year. The fall was due to the weak performance of the corporate and investment bank division.
Head Office: Loss before tax was £153 million ($179.6 million), narrower than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2022, were £1,513.7 billion ($1,830 billion), down 12% from the prior-quarter end.
Total risk-weighted assets decreased 4% from the prior quarter to £336.5 billion ($460.8 billion) as of Dec 31, 2022.
As of Dec 31, 2022, the Common Equity Tier 1 (CET1) ratio was 13.9%, down from 15.1% as of Dec 31, 2021.
2023 Guidance
Management expects the loan loss rate to be in the 50-60 basis points range.
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 low 60%.
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.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2022 net profit attributable to shareholders of $1.65 billion, up 22.6% from the prior-year quarter.
UBS Group’s quarterly performance was aided by a decline in expenses. However, lower revenues acted as a headwind.
The performances of the Global Wealth Management and the Personal & Corporate Banking divisions were impressive. However, the Asset Management arm and the Investment Bank did not perform well.
Deutsche Bank (DB - Free Report) reported a fourth-quarter 2022 profit attributable to its shareholders of €1.80 billion ($1.84 billion), up significantly from the year-ago quarter. The Germany-based lender reported a profit before tax of €775 million ($791.2 million).
DB’s results were largely driven by higher net revenues and lower expenses. However, higher provision for credit losses was an offsetting factor.
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Barclays (BCS) Q4 Earnings Down on Higher Costs, Revenues Up
Barclays (BCS - Free Report) reported fourth-quarter 2022 net income attributable to ordinary equity holders of £1.04 billion ($1.22 billion), down 4% from the prior-year quarter.
Shates of BCS on NYSE tanked 9.7% in pre-market trading on weak quarterly performance.
Barclays’ quarterly results were adversely impacted by higher expenses. Also, the company recorded a substantial year-over-year rise in credit impairment charges. On the other hand, an increase in revenues acted as a tailwind.
Revenues Improve, Expenses Rise
Total income was £5.8 billion ($6.81 billion), up 12% year over year.
Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.75 billion ($4.4 billion), up 7%.
The cost-to-income ratio was 69%, down from 73% a year ago.
In the reported quarter, Barclays recorded credit impairment charges of £498 million ($584.5 million) against credit impairment releases in the year-ago quarter.
Pre-tax income was £1.31 billion ($1.54 billion), down 8% year over year.
Segment Performance Mixed
Barclays UK: Profit before tax was £667 million ($782.8 million), up 30% from the year-ago quarter. The rise was driven by higher total income.
Barclays International: Profit before tax was £796 million ($934.2 million), down 28% year over year. The fall was due to the weak performance of the corporate and investment bank division.
Head Office: Loss before tax was £153 million ($179.6 million), narrower than the loss incurred in the prior-year quarter.
Balance Sheet & Capital Ratios Strong
Total assets as of Dec 31, 2022, were £1,513.7 billion ($1,830 billion), down 12% from the prior-quarter end.
Total risk-weighted assets decreased 4% from the prior quarter to £336.5 billion ($460.8 billion) as of Dec 31, 2022.
As of Dec 31, 2022, the Common Equity Tier 1 (CET1) ratio was 13.9%, down from 15.1% as of Dec 31, 2021.
2023 Guidance
Management expects the loan loss rate to be in the 50-60 basis points range.
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 low 60%.
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 #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 2022 net profit attributable to shareholders of $1.65 billion, up 22.6% from the prior-year quarter.
UBS Group’s quarterly performance was aided by a decline in expenses. However, lower revenues acted as a headwind.
The performances of the Global Wealth Management and the Personal & Corporate Banking divisions were impressive. However, the Asset Management arm and the Investment Bank did not perform well.
Deutsche Bank (DB - Free Report) reported a fourth-quarter 2022 profit attributable to its shareholders of €1.80 billion ($1.84 billion), up significantly from the year-ago quarter. The Germany-based lender reported a profit before tax of €775 million ($791.2 million).
DB’s results were largely driven by higher net revenues and lower expenses. However, higher provision for credit losses was an offsetting factor.