Barclays (BCS - Free Report) reported fourth-quarter 2018 net loss attributable to ordinary equity holders of £76 million ($97.8 million). This reflects improvement from net loss attributable to ordinary equity holders of £1.29 billion ($1.66 billion) recorded in the prior-year quarter.
Results were hurt by a decline in net operating income, mainly due to higher credit impairment charges. Moreover, rise in expenses acted as a headwind. However, balance sheet position remained strong.
Revenues Decline, Costs Rise
Net operating income was £4.43 billion ($5.70 billion), down marginally from £4.45 billion ($6.01 billion) recorded in the prior-year quarter. The decline was due to higher credit impairment charges and other provisions.
Operating expenses (excluding U.K. bank levy, GMP charge, and litigation and conduct costs) totaled £3.62 billion ($4.66 billion), increasing marginally from the year-ago quarter.
Cost to income ratio was 81%, down from 87% in the prior-year quarter.
Credit impairment charges increased 12.2% from the prior-year quarter to £643 million ($827.2 million).
Pre-tax income was £374 million ($481.1 million), up from £93 million ($125.6 million) in the year-ago quarter.
Barclays U.K.: Profit before tax was £390 million ($501.7 million), declining from £452 million ($610.6 million) in the year-ago quarter. Lower net operating income, partly offset by lower operating expenses hurt the segment’s performance.
Barclays International: Profit before tax was £215 million ($276.6 million), up significantly from £6 million ($8.1 million) recorded in the prior-year quarter. The rise was mainly driven by improved performance in corporate and investment bank division.
Head Office: Loss before tax was £231 million ($297.2 million), improving from loss of £365 million ($493.1 million) in the prior-year period.
Balance Sheet and Capital Ratios
Total assets as of Dec 31, 2018, were £1,133.3 billion ($1,438.2 billion), down 3.2% sequentially.
As of Dec 31, 2018, Common Equity Tier 1 ratio was 13.2%, down from 13.3% on Dec 31, 2017.
Total risk-weighted assets were £311.9 billion ($395.8 billion) as of Dec 31, 2018.
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) are expected to be £13.6-£13.9 billion in 2019.
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.
Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Foreign Banks
HSBC Holdings (HSBC - Free Report) recorded fourth-quarter 2018 pre-tax profit of $3.3 billion, up 41.3% year over year. The increase was due to rise in revenues.
Canadian Imperial Bank of Commerce (CM - Free Report) and The Toronto-Dominion Bank (TD - Free Report) are expected to report results on Feb 28.
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