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Can Loan Growth Aid Barclays' (BCS) Revenues in Q2 Earnings?

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Barclays (BCS - Free Report) is slated to announce second-quarter 2018 results on Aug 2, before the opening bell. For the to-be-reported quarter, it is expected to record year-over-year growth in revenues as well as earnings.

Lower expenses, rise in trading income and decline in credit impairment charges supported the company’s results in the last reported quarter. However, fall in interest income and muted underwriting fees acted as headwinds.

Let’s see how things have shaped up for this announcement.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to impact Q2 results.

Factors at Play

Loan Growth to Support Interest Income: While a low interest rate environment across several major economies continue hampering interest income growth, decent increase in loan demand is likely to offset it to some extent.

Muted Growth in Trading Revenues: After an impressive first quarter, in terms of trading activities, volatility returned to normalized levels during the second quarter. Though the April-June quarter witnessed some uncertainty, mainly related to the U.S.-China trade war and some other geopolitical tensions, it was insufficient to aid strong trading. Thus, the company’s trading revenues are not expected to witness much improvement during the quarter under review.

Investment Banking to Marginally Support Revenues: Debt underwriting fees are expected to decline in the second quarter because rising rates are likely to have slowed down corporates’ involvement in debt underwriting activities.

However, equity issuances, globally, are expected to get a boost from IPOs and follow-on offerings. Thus, the related fees are anticipated to either remain stable or improve marginally for Barclays. Also, global M&A activities, in terms of deals closed, represent a strong second quarter. Thus, potential rise in fees from increasing M&As will likely lead to slight rise in advisory revenues for the company.

Cost Saving Efforts to Offer Some Support: Barclays has been on a streamlining spree since the second half of 2016. It announced divestitures of several non-core businesses. These initiatives are expected to improve the bank’s operating efficiency and trim costs. Nevertheless, legal and other regulatory expenses are bound to adversely affect its bottom line.

Now, let’s check what our quantitative model predicts.

According to our quantitative model, it cannot be conclusively predicted if Barclays will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Barclays is 0.00%.

Zacks Rank: Barclays has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for earnings of 29 cents for the second quarter shows a significant improvement on a year-over-year basis. Also, the consensus estimate for sales is $7.01 billion for the to-be-reported quarter, reflecting rise of 8.4% from the prior-year quarter.

Barclays PLC Price and EPS Surprise

Barclays PLC Price and EPS Surprise | Barclays PLC Quote

Earnings Schedule of Other Foreign Banks

Royal Bank of Scotland Group (RBS - Free Report) , HSBC Holdings (HSBC - Free Report) and The Toronto-Dominion Bank (TD - Free Report) are scheduled to report results on Aug 3, Aug 6 and Aug 30, respectively.

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