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Barclays (BCS) Q2 Earnings & Revenues Improve, Dividend Up

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Barclays (BCS - Free Report) reported second-quarter 2018 net income attributable to ordinary equity holders of £1.23 billion ($1.67 billion). This reflects significant improvement from net loss attributable to ordinary equity holders of £1.4 billion ($1.88 billion) in the prior-year quarter.

In the pre-market trading, Barclays’ shares declined nearly 1% on the NYSE. The actual picture will emerge after the full day’s trading session, once investors and analysts go through the core results.

Results were driven by improvement in trading activities, lower expenses and decline in credit impairment charges. However, a fall in interest income and muted underwriting fees acted as headwinds. Also, the bank’s balance sheet position remained strong.

Notably, following the improved results, Barclays announced interim dividend of 2.5 pence per share, up from 1 pence paid in the year-ago quarter.

Revenues Improve & Costs Fall

Net operating income was £5.29 billion ($7.20 billion), up 17% year over year. The increase reflects 37% growth in net fee, commission and other income.

Operating expenses (excluding U.K. bank levy and litigation and conduct) totaled £3.31 billion ($4.50 billion), declining 3% from the year-ago quarter.

Cost to income ratio was 61%, down from 81% in the prior-year quarter.  

Credit impairment charges plunged 46% from the prior-year quarter to £283 million ($385 million).

Pre-tax income was £1.90 billion ($2.58 billion), up significantly from £659 million ($884.7 million) in a year ago quarter.

Segment Performance

Barclays U.K.: Profit before tax came in at £656 million ($892.4 million), an improvement from pre-tax loss of £74 million ($99.4 million) in the year-ago quarter. Rise in net operating income andlower operating expenses were the primary drivers for the segment’s performance.

Barclays International: Profit before tax came in at £1.30 billion ($1.77 billion), up 3% from the prior-year quarter. The rise was mainly driven by improved performance in corporate and investment bank as well as consumer, cards and payments divisions.

Head Office: Loss before tax was £58 million ($78.9 million), improving from loss of £122 million ($163.8 million) in the prior-year period.

Strong Balance Sheet and Capital Ratios

Total assets as of Jun 30, 2018 came in at £1,149.6 billion ($1,518.5 billion), up nearly 1% sequentially.

As of Jun 30, 2018, Common Equity Tier 1 ratio was 13.0%, up from 12.7% on Mar 31, 2018.

Total risk-weighted assets were £319.3 billion ($421.8 billion) as of Jun 30, 2018.

Outlook

The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.

Operating expenses (excluding litigation and conduct charges) for 2018 are expected to be £13.9 billion. Further, management remains on track to achieve operating expenses in the range of £13.6-£13.9 billion in 2019.

Barclays expects loan impairment for second half 2018 to be higher than first half.

The company intends to announce dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.

Our View

Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.

Barclays PLC Price, Consensus and EPS Surprise

 

Barclays PLC Price, Consensus and EPS Surprise | 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 & Earnings Release Date

Deutsche Bank AG (DB - Free Report) reported net income of €401 million ($467 million) in second-quarter 2018, which tanked 13.7% from year-ago quarter. Income before income taxes plunged 13.5% year over year to €711 million ($828.1 million).

ItauUnibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$6.4 billion ($1.78 billion) in second-quarter 2018, up 3.2% year over year. Including non-recurring items, net income came in at R$6.2 billion ($1.72 billion), up 3.3% year over year.

HSBC Holdings (HSBC - Free Report) is slated to announce results on Aug 6.

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