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Barclays (BCS) Q2 Earnings Fall Y/Y, 2024 NII View Raised
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Barclays’ (BCS - Free Report) second-quarter 2024 net income attributable to ordinary equity holders of £1.24 billion ($1.56 billion) declined 7% year over year.
The company recorded a rise in credit impairment charges, which hurt the results. However, an increase in revenues, a decline in operating expenses (showing the success of efficiency initiatives) and a solid balance sheet aided the results to some extent.
Revenues Up, Expenses Dip
Total income was £6.32 billion ($7.97 billion), up 1% year over year.
Operating expenses (excluding litigation and conduct costs) totaled £4 billion ($5.05 billion), down 2% year over year.
The cost-to-income ratio was 63%, stable with the year-ago period.
In the reported quarter, Barclays recorded credit impairment charges of £384 million ($484.5 million), up 3% year over year.
Pre-tax income was £1.51 billion ($1.91 billion), down 6% year over year.
Balance Sheet Solid
Total assets as of Jun 30, 2024, were £1,576.6 billion ($1,993.5 billion), up 2% from the end of June 2023.
Total risk-weighted assets increased 4% from the Jun 30, 2023, level to £351.4 billion ($443.9 billion) as of Jun 30, 2024.
As of Jun 30, 2024, the Common Equity Tier 1 (CET1) ratio was 13.6% compared with 13.8% as of Jun 30, 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 £11 billion for 2024, up from the previous estimation of £10.7 billion. Of this, Barclays UK is projected to generate NII of £6.3 billion (excluding the impacts of the Tesco Bank acquisition). The outlook is better than the prior NII projection of £6.1 billion for Barclays UK.
The company projects a total income of £30 billion for 2026.
For 2024, the cost-to-income ratio is expected to be 63%, which includes £1 billion of gross efficiency savings. 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 gross efficiency savings of £2 billion by 2026.
For 2026, Barclays Investment Bank RWAs are expected to be 50% of the Group RWAs.
For 2024, 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.
HSBC Holdings’ (HSBC - Free Report) second-quarter 2024 pre-tax profit of $8.9 billion was up 1.5% from the prior-year quarter. The reported quarter results included a loss related to the recycling of reserves following the completion of the sale of the Russian business. This was partly offset by growth in Securities Financing and Equities in Global Banking and Markets, and from Wealth in Wealth and Personal Banking.
HSBC’s results were aided by a decline in expected credit losses and other credit impairment charges. However, a fall in revenues and higher expenses were the undermining factors.
Deutsche Bank (DB - Free Report) reported a second-quarter 2024 loss attributable to its shareholders of €143 million ($155.6 million) against the year-ago reported profit attributable to shareholders of €763 million ($830.7 million).
DB’s results were negatively impacted by increase in expenses and provision for credit losses. However, growth in commissions and fee income, and stable NII acted as tailwinds.
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Barclays (BCS) Q2 Earnings Fall Y/Y, 2024 NII View Raised
Barclays’ (BCS - Free Report) second-quarter 2024 net income attributable to ordinary equity holders of £1.24 billion ($1.56 billion) declined 7% year over year.
The company recorded a rise in credit impairment charges, which hurt the results. However, an increase in revenues, a decline in operating expenses (showing the success of efficiency initiatives) and a solid balance sheet aided the results to some extent.
Revenues Up, Expenses Dip
Total income was £6.32 billion ($7.97 billion), up 1% year over year.
Operating expenses (excluding litigation and conduct costs) totaled £4 billion ($5.05 billion), down 2% year over year.
The cost-to-income ratio was 63%, stable with the year-ago period.
In the reported quarter, Barclays recorded credit impairment charges of £384 million ($484.5 million), up 3% year over year.
Pre-tax income was £1.51 billion ($1.91 billion), down 6% year over year.
Balance Sheet Solid
Total assets as of Jun 30, 2024, were £1,576.6 billion ($1,993.5 billion), up 2% from the end of June 2023.
Total risk-weighted assets increased 4% from the Jun 30, 2023, level to £351.4 billion ($443.9 billion) as of Jun 30, 2024.
As of Jun 30, 2024, the Common Equity Tier 1 (CET1) ratio was 13.6% compared with 13.8% as of Jun 30, 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 £11 billion for 2024, up from the previous estimation of £10.7 billion. Of this, Barclays UK is projected to generate NII of £6.3 billion (excluding the impacts of the Tesco Bank acquisition). The outlook is better than the prior NII projection of £6.1 billion for Barclays UK.
The company projects a total income of £30 billion for 2026.
For 2024, the cost-to-income ratio is expected to be 63%, which includes £1 billion of gross efficiency savings. 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 gross efficiency savings of £2 billion by 2026.
For 2026, Barclays Investment Bank RWAs are expected to be 50% of the Group RWAs.
For 2024, 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-eps-surprise-chart | Barclays PLC Quote
Currently, Barclays carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
HSBC Holdings’ (HSBC - Free Report) second-quarter 2024 pre-tax profit of $8.9 billion was up 1.5% from the prior-year quarter. The reported quarter results included a loss related to the recycling of reserves following the completion of the sale of the Russian business. This was partly offset by growth in Securities Financing and Equities in Global Banking and Markets, and from Wealth in Wealth and Personal Banking.
HSBC’s results were aided by a decline in expected credit losses and other credit impairment charges. However, a fall in revenues and higher expenses were the undermining factors.
Deutsche Bank (DB - Free Report) reported a second-quarter 2024 loss attributable to its shareholders of €143 million ($155.6 million) against the year-ago reported profit attributable to shareholders of €763 million ($830.7 million).
DB’s results were negatively impacted by increase in expenses and provision for credit losses. However, growth in commissions and fee income, and stable NII acted as tailwinds.