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Barclays (BCS) Reports Net Loss in Q3, Provisions Surge
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Barclays (BCS - Free Report) reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter.
Shares of Barclays on the NYSE rose nearly 2.9% in pre-market trading. Nonetheless, full-day trading will provide a better picture.
Results were adversely impacted by a substantial rise in credit impairment charges. However, a decline in operating expenses along with higher revenues aided the company. Also, a strong balance sheet position aided its performance.
Revenues Improve, Costs Decline
Net operating income was £5.08 billion ($6.26 billion), up 4.2% from the prior-year quarter. The increase was due to higher net fee, commission and other income, and rise in net interest income.
Operating expenses (excluding litigation and conduct costs) totaled £3.29 billion ($4.06 billion), down 1.1% from the year-ago quarter.
Cost to income ratio was 88%, up from 67%.
Credit impairment charges and other provisions surged 81.5% to £461 million ($568.3 million). This primarily resulted from extra payment protection insurance (PPI) costs that the company witnessed in the quarter.
Pre-tax income was £246 million ($303.2 million), down 83.2% from the year-ago quarter.
Segmental Performance
Barclays U.K.: Loss before tax was £687 million ($846.9 million) against profit before tax of £740 million ($964.1 million) in the year-ago quarter. Decline in operating income and higher total operating expenses hurt the segment’s performance.
Barclays International: Profit before tax was £1.14 billion ($1.41 billion), up 33.8% from the prior-year quarter. The rise mainly resulted from improved performance in the corporate and investment bank division.
Head Office: Loss before tax was £204 million ($251.5 million), wider than loss of £129 million ($168.1 million) incurred in the prior-year quarter.
Balance Sheet and Capital Ratios Strong
Total assets as of Sep 30, 2019, were £1,290.4 billion ($1,585.8 billion), up 34.7 sequentially.
As of Sep 30, 2019, Common Equity Tier 1 ratio was 13.4%, up from 13.2% on Sep 30, 2018.
Total risk-weighted assets were £313.3 billion ($385 billion) as of Sep 30, 2019.
Outlook
The company continues to target return on tangible equity of more than 9% in 2019 and more than 10% in 2020.
Given the challenging operating backdrop, the company remains to track to keep operating expenses (excluding litigation and conduct charges) below £13.6 billion in 2019.
Management now expects CET1 ratio of 13.5% by 2019 end.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to continue improving. However, pressure on revenue growth remains a major near-term concern. Moreover, uncertainty related to Brexit as well as slowdown in the global economy is expected to hurt its financials.
HSBC Holdings (HSBC - Free Report) is scheduled to announce results on Oct 28. While Deutsche Bank (DB - Free Report) is slated to release results on Oct 30, Itau Unibanco Holding S.A. (ITUB - Free Report) will report results on Nov 4.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Barclays (BCS) Reports Net Loss in Q3, Provisions Surge
Barclays (BCS - Free Report) reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter.
Shares of Barclays on the NYSE rose nearly 2.9% in pre-market trading. Nonetheless, full-day trading will provide a better picture.
Results were adversely impacted by a substantial rise in credit impairment charges. However, a decline in operating expenses along with higher revenues aided the company. Also, a strong balance sheet position aided its performance.
Revenues Improve, Costs Decline
Net operating income was £5.08 billion ($6.26 billion), up 4.2% from the prior-year quarter. The increase was due to higher net fee, commission and other income, and rise in net interest income.
Operating expenses (excluding litigation and conduct costs) totaled £3.29 billion ($4.06 billion), down 1.1% from the year-ago quarter.
Cost to income ratio was 88%, up from 67%.
Credit impairment charges and other provisions surged 81.5% to £461 million ($568.3 million). This primarily resulted from extra payment protection insurance (PPI) costs that the company witnessed in the quarter.
Pre-tax income was £246 million ($303.2 million), down 83.2% from the year-ago quarter.
Segmental Performance
Barclays U.K.: Loss before tax was £687 million ($846.9 million) against profit before tax of £740 million ($964.1 million) in the year-ago quarter. Decline in operating income and higher total operating expenses hurt the segment’s performance.
Barclays International: Profit before tax was £1.14 billion ($1.41 billion), up 33.8% from the prior-year quarter. The rise mainly resulted from improved performance in the corporate and investment bank division.
Head Office: Loss before tax was £204 million ($251.5 million), wider than loss of £129 million ($168.1 million) incurred in the prior-year quarter.
Balance Sheet and Capital Ratios Strong
Total assets as of Sep 30, 2019, were £1,290.4 billion ($1,585.8 billion), up 34.7 sequentially.
As of Sep 30, 2019, Common Equity Tier 1 ratio was 13.4%, up from 13.2% on Sep 30, 2018.
Total risk-weighted assets were £313.3 billion ($385 billion) as of Sep 30, 2019.
Outlook
The company continues to target return on tangible equity of more than 9% in 2019 and more than 10% in 2020.
Given the challenging operating backdrop, the company remains to track to keep operating expenses (excluding litigation and conduct charges) below £13.6 billion in 2019.
Management now expects CET1 ratio of 13.5% by 2019 end.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to continue improving. However, pressure on revenue growth remains a major near-term concern. Moreover, uncertainty related to Brexit as well as slowdown in the global economy is expected to hurt its financials.
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.
Earnings Release Dates of Other Foreign Banks
HSBC Holdings (HSBC - Free Report) is scheduled to announce results on Oct 28. While Deutsche Bank (DB - Free Report) is slated to release results on Oct 30, Itau Unibanco Holding S.A. (ITUB - Free Report) will report results on Nov 4.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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