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Barclays (BCS) Q3 Earnings Decline Y/Y Despite Higher Revenues

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Barclays (BCS - Free Report) reported a third-quarter 2023 net income attributable to ordinary equity holders of £1.27 billion ($1.61 billion), down 16% from the prior-year quarter.

The company recorded an increase in revenues, along with higher credit impairment charges. Operating expenses increased marginally in the quarter under review.

Revenues Improve, Expenses Rise Marginally

Total income was £6.26 billion ($7.93 billion), up 5% year over year.

Operating expenses (excluding litigation and conduct costs) totaled £3.95 billion ($5 billion), up marginally year over year.

The cost-to-income ratio was 63%, up from 60% a year ago.

In the reported quarter, Barclays recorded credit impairment charges of £433 million ($548.2 million), up 14% from the year-ago quarter.

Pre-tax income was £1.89 billion ($2.39 billion), down 4% year over year.

Segmental Performance Decent

Barclays UK: Profit before tax was £765 million ($968.5 million), up marginally from the year-ago quarter. The rise was driven by lower expenses and credit impairment charges.

Barclays International: Profit before tax was £1.26 billion ($1.60 billion), down 10% year over year. The decline was due to a relatively weak performance of the consumer, cards and payments division, as well as the corporate and investment bank division.

Head Office: The loss before tax was £141 million ($178.5 million), narrower than the loss incurred in the prior-year quarter.

Balance Sheet Strong

Total assets as of Sep 30, 2023, were £1,591.7 billion ($1,942.1 billion), up 5% from the end of December 2022.

Total risk-weighted assets increased 2% from the Dec 31, 2022 level to £341.9 billion ($417.2 billion) as of Sep 30, 2023.

As of Sep 30, 2023, the Common Equity Tier 1 (CET1) ratio was 14%, up from 13.9% as of Dec 31, 2022.

Capital Distribution Update

Barclays completed the share buyback worth £750 million.

2023 Guidance

Management expects the loan loss rate to be 50-60 basis points.

The Barclays UK NIM is expected to be 3.05-3.10%.

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. The company’s cost-saving efforts will likely keep aiding financials. However, a challenging operating backdrop is expected to put pressure on revenue growth 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 of U.S. Banks

State Street’s (STT - Free Report) third-quarter 2023 adjusted earnings of $1.93 per share surpassed the Zacks Consensus Estimate of $1.77. The bottom line was 6% higher than the prior-year quarter level.

STT’s results were primarily aided by an increase in fee revenues. Also, the company did not record any provisions in the quarter, which was a positive. However, lower net interest revenues and higher expenses hurt the results to some extent.

Hancock Whitney’s (HWC - Free Report) third-quarter 2023 earnings of $1.12 per share outpaced the Zacks Consensus Estimate of $1.02. However, the bottom line reflects a year-over-year decline of 27.7%.

HWC’s results were positively impacted by a marginal rise in non-interest income. The loan balance witnessed a slight sequential rise, which was another positive. However, lower net interest income, higher expenses and significantly higher provisions were major headwinds.

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