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Barclays (BCS) Q1 Earnings, Revenues & Expenses Decline Y/Y

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Barclays (BCS - Free Report) reported first-quarter 2024 net income attributable to ordinary equity holders of £1.55 billion ($1.97 billion), down 13% year over year.

The company recorded lower revenues in the quarter, which was a negative. However, a decline in operating expenses, along with lower credit impairment charges, aided the results to some extent.

Revenues & Expenses Decline

Total income was £6.95 billion ($8.81 billion), down 4% year over year.

Operating expenses (excluding litigation and conduct costs, and charges related to the U.K. regulatory levies) totaled £4 billion ($5.07 billion), down 3% year over year.

The cost-to-income ratio was 60%, up from 57% a year ago.

In the reported quarter, Barclays recorded credit impairment charges of £513 million ($650.5 million), down 2% year over year.

Pre-tax income was £2.28 billion ($2.89 billion), down 12% year over year.

Quarterly Segment Performance

Barclays UK: Profit before tax was £705 million ($894 million), down 6% from the year-ago quarter. The fall was due to lower total income.

Barclays UK Corporate Bank: Profit before tax was £168 million ($213 million), down 27% year over year. The decline was mainly due to a fall in total income and a rise in total operating expenses.

Barclays Private Bank and Wealth Management: Profit before tax was £95 million ($120.5 million), down 15% year over year. The decline was mainly due to a rise in total operating expenses.

Barclays Investment Bank: Profit before tax was £1.34 billion ($1.70 billion), down 12% year over year. The decline was mainly due to a fall in total income.

Barclays US Consumer Bank: Profit before tax was £59 million ($74.8 million), down 24% year over year. The decline was mainly due to a rise in credit impairment charges.

Head Office: The loss before tax was £89 million ($112.9 million), unchanged from the prior-year quarter.

Balance Sheet Solid

Total assets as of Mar 31, 2024, were £1,577.1 billion ($1,990 billion), up 7% from the end of December 2023.

Total risk-weighted assets increased 2% from the Dec 31, 2023, level to £349.6 billion ($441.1 billion) as of Mar 31, 2024.

As of Mar 31, 2024, the Common Equity Tier 1 (CET1) ratio was 13.5% compared with 13.6% as of Mar 31, 2023.

Guidance

Management expects the loan loss rate to be 50-60 basis points through the cycle.

Net interest income or NII (excluding Barclays Investment Bank and Head Office) is expected to be £10.7 billion in 2024. Of this, Barclays UK is projected to generate NII of £6.1 billion (excluding the impacts of the Tesco Bank acquisition, which is expected to generate an annualized NII of £400 million in the first year post-closure).

The company is targeting total income of £30 billion for 2026.

For 2024, the cost-to-income ratio is expected to be 63%. For 2026, operating expenses are likely to be £17 billion and the cost-to-income ratio is anticipated to be in the high-50s in percentage terms. This includes £1 billion of gross efficiency savings in 2024 and total gross efficiency savings of £2 billion by 2026.

In 2026, Barclays Investment Bank RWAs are expected to be 50% of the Group RWAs.

Over the medium term, the CET1 ratio is expected to be 13-14%.

Barclays expects to deliver a return on tangible equity of more than 10% or 10.5% (excluding inorganic activity) in 2024 and above 12% in 2026.

Additionally, BCS plans to return at least £10 billion of capital to shareholders between 2024 and 2026 through dividends and share buybacks, with a continued preference for buybacks.

Our View

Given Barclays’ restructuring and business-simplification efforts, its operating efficiency is expected to improve in the quarters ahead. The company’s cost-saving efforts will likely keep aiding financials. Yet, a challenging operating backdrop is expected to put pressure on revenue growth.

Barclays PLC Price, Consensus and EPS Surprise

 

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.

Competitive Landscape

We now look forward to the earnings releases of other foreign banks like HSBC Holdings plc (HSBC - Free Report) and UBS Group AG (UBS - Free Report) .

HSBC is expected to release quarterly results on Apr 30 and UBS is expected to release results on May 7.


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