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Barclays (BCS) Q4 Earnings Up on Higher Revenues, Costs Fall
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Barclays (BCS - Free Report) reported fourth-quarter 2019 net income attributable to ordinary equity holders of £681 million ($877.4 million). This reflects a marked improvement from net loss attributable to ordinary equity holders of £14 million ($18 million) in the year-ago quarter.
Results benefited from improvement in top line and lower operating costs. Also, decline in credit impairment charges and a strong balance sheet position were tailwinds.
Revenues Rise, Costs Decline
Net operating income was £4.78 billion ($6.16 billion), up 7.9% year over year. The increase was driven by higher net fee, commission and other income, and rise in net interest income.
Operating expenses (excluding litigation and conduct costs) totaled £3.53 billion ($4.55 billion), down 9.2% from the year-ago quarter.
Cost to income ratio was 70%, down from 81%.
Credit impairment charges and other provisions declined 18.7% to £523 million ($673.8 million).
Pre-tax income was £1.1 billion ($1.42 billion), increasing substantially from £374 million ($481 million) in the year-ago quarter.
Quarterly Segment Performance
Barclays U.K.: Income before tax was £647 million ($833.6 million), up 65.9% from the year-ago quarter. Rise in operating income and lower total operating expenses supported the segment’s performance.
Barclays International: Profit before tax was £640 million ($824.6 million), up substantially from £215 million ($276.5 million) in the prior-year quarter. The surge resulted from improved performance in both corporate and investment bank, and consumer, cards and payments divisions.
Head Office: Loss before tax was £190 million ($244.8 million), narrower than loss of £231 million ($297.1 million) incurred in the prior-year quarter.
Strong Balance Sheet & Capital Ratios
Total assets as of Dec 31, 2019, were £1,140.2 billion ($1,495.4 billion), down 11.6% sequentially.
As of Dec 31, 2019, Common Equity Tier 1 ratio was 13.8%, up from 13.2% on Dec 31, 2018.
Total risk-weighted assets were £295.1 billion ($387 billion) as of Dec 31, 2019.
Outlook
Barclays continues to target return on tangible equity of more than 10% for 2020. Nonetheless, global macroeconomic uncertainty and the low interest rate environment have made achieving this target more challenging.
Management expects CET1 ratio of 13.5% going forward. Further, cost-to-income is projected to be less than 60%.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to continue improving. However, uncertainty related to Brexit, and slowdown in the global economy are expected to hurt its financials.
UBS Group AG (UBS - Free Report) reported fourth-quarter 2019 net profit attributable to shareholders of $722 million compared with the prior-year quarter’s $315 million. The company’s performance was supported by higher net interest income along with rise in net fee and commission income. Further, decline in expenses was a tailwind.
Marred by significant restructuring costs, Deutsche Bank (DB - Free Report) reported fourth-quarter 2019 net loss of €1.48 billion ($1.64 billion). The results were majorly affected by transformation charges, and restructuring and severance expenses. Also, lower revenues and higher expenses were undermining factors. However, strong capital position and lower provisions were tailwinds.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$7.3 billion ($1.77 billion) in fourth-quarter 2019, up 12.6% year over year. Results display higher revenues, managerial financial margin and a solid balance sheet position. However, elevated expenses and provisions were headwinds.
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Barclays (BCS) Q4 Earnings Up on Higher Revenues, Costs Fall
Barclays (BCS - Free Report) reported fourth-quarter 2019 net income attributable to ordinary equity holders of £681 million ($877.4 million). This reflects a marked improvement from net loss attributable to ordinary equity holders of £14 million ($18 million) in the year-ago quarter.
Results benefited from improvement in top line and lower operating costs. Also, decline in credit impairment charges and a strong balance sheet position were tailwinds.
Revenues Rise, Costs Decline
Net operating income was £4.78 billion ($6.16 billion), up 7.9% year over year. The increase was driven by higher net fee, commission and other income, and rise in net interest income.
Operating expenses (excluding litigation and conduct costs) totaled £3.53 billion ($4.55 billion), down 9.2% from the year-ago quarter.
Cost to income ratio was 70%, down from 81%.
Credit impairment charges and other provisions declined 18.7% to £523 million ($673.8 million).
Pre-tax income was £1.1 billion ($1.42 billion), increasing substantially from £374 million ($481 million) in the year-ago quarter.
Quarterly Segment Performance
Barclays U.K.: Income before tax was £647 million ($833.6 million), up 65.9% from the year-ago quarter. Rise in operating income and lower total operating expenses supported the segment’s performance.
Barclays International: Profit before tax was £640 million ($824.6 million), up substantially from £215 million ($276.5 million) in the prior-year quarter. The surge resulted from improved performance in both corporate and investment bank, and consumer, cards and payments divisions.
Head Office: Loss before tax was £190 million ($244.8 million), narrower than loss of £231 million ($297.1 million) incurred in the prior-year quarter.
Strong Balance Sheet & Capital Ratios
Total assets as of Dec 31, 2019, were £1,140.2 billion ($1,495.4 billion), down 11.6% sequentially.
As of Dec 31, 2019, Common Equity Tier 1 ratio was 13.8%, up from 13.2% on Dec 31, 2018.
Total risk-weighted assets were £295.1 billion ($387 billion) as of Dec 31, 2019.
Outlook
Barclays continues to target return on tangible equity of more than 10% for 2020. Nonetheless, global macroeconomic uncertainty and the low interest rate environment have made achieving this target more challenging.
Management expects CET1 ratio of 13.5% going forward. Further, cost-to-income is projected to be less than 60%.
Our View
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to continue improving. However, uncertainty related to Brexit, and slowdown in the global economy are 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.
Performance of Other Foreign Banks
UBS Group AG (UBS - Free Report) reported fourth-quarter 2019 net profit attributable to shareholders of $722 million compared with the prior-year quarter’s $315 million. The company’s performance was supported by higher net interest income along with rise in net fee and commission income. Further, decline in expenses was a tailwind.
Marred by significant restructuring costs, Deutsche Bank (DB - Free Report) reported fourth-quarter 2019 net loss of €1.48 billion ($1.64 billion). The results were majorly affected by transformation charges, and restructuring and severance expenses. Also, lower revenues and higher expenses were undermining factors. However, strong capital position and lower provisions were tailwinds.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$7.3 billion ($1.77 billion) in fourth-quarter 2019, up 12.6% year over year. Results display higher revenues, managerial financial margin and a solid balance sheet position. However, elevated expenses and provisions were headwinds.
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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