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Barclays' Q3 Earnings Jump on Solid IB, Stock Up on Uptick in NII Target
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Barclays’ (BCS - Free Report) third-quarter 2024 net income attributable to ordinary equity holders of £1.56 billion ($2.03 billion) grew 23% year over year.
Stay up-to-date with all quarterly releases: See ZacksEarnings Calendar.
Shares of BCS on NYSE gained 4% in pre-market trading as profit increased. Investors also cheered an upward tweak in net interest income (NII) 2024 guidance.
An increase in revenues (driven by solid investment banking performance), stable operating expenses (showing the success of cost-efficiency initiatives) and a solid balance sheet supported the results. Also, the company recorded a fall in credit impairment charges in the quarter.
Barclays’s Revenues Rise, Expenses Stable
Total income was £6.55 billion ($8.52 billion), up 5% year over year.
Operating expenses (excluding litigation and conduct costs) of £3.95 billion ($5.14 billion) were relatively stable.
The cost-to-income ratio was 61%, down from 63% in the year-ago period.
In the reported quarter, Barclays recorded credit impairment charges of £374 million ($486.4 million), down 14% year over year.
Pre-tax income was £2.23 billion ($2.90 billion), up 18%.
BCS’ Balance Sheet Solid
Total assets, as of Sept. 30, 2024, were £1,531.1 billion ($2,049.7 billion), down 4% from the end of September 2023.
Total risk-weighted assets decreased marginally from the Sept. 30, 2023, level to £340.4 billion ($455.7 billion) as of Sept. 30, 2024.
As of Sept. 30, 2024, the Common Equity Tier 1 (CET1) ratio was 13.8% compared with 14% as of Sept. 30, 2023.
Barclays’ Guidance
Management expects the loan loss rate to be 50-60 basis points through the cycle, with the 2024 number at the lower end of this range (including the day 1 impact of the Tesco Bank acquisitions).
NII (excluding Barclays Investment Bank and Head Office) is expected to be more than £11 billion in 2024, up from the previous estimation of £11 billion. Of this, Barclays UK is projected to generate NII of £6.5 billion (excluding the impacts of the Tesco Bank acquisition). The outlook is better than the prior NII projection of £6.3 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 on Barclays
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 worrisome.
Currently, Barclays carries a Zacks Rank #3 (Hold).
Earnings Release Dates of Barclays’ Peers
Among Barclays’ peers, HSBC Holdings (HSBC - Free Report) is scheduled to announce third-quarter 2024 results on Oct. 29 and UBS Group AG (UBS - Free Report) is slated to report on Oct. 30.
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Barclays' Q3 Earnings Jump on Solid IB, Stock Up on Uptick in NII Target
Barclays’ (BCS - Free Report) third-quarter 2024 net income attributable to ordinary equity holders of £1.56 billion ($2.03 billion) grew 23% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Shares of BCS on NYSE gained 4% in pre-market trading as profit increased. Investors also cheered an upward tweak in net interest income (NII) 2024 guidance.
An increase in revenues (driven by solid investment banking performance), stable operating expenses (showing the success of cost-efficiency initiatives) and a solid balance sheet supported the results. Also, the company recorded a fall in credit impairment charges in the quarter.
Barclays’s Revenues Rise, Expenses Stable
Total income was £6.55 billion ($8.52 billion), up 5% year over year.
Operating expenses (excluding litigation and conduct costs) of £3.95 billion ($5.14 billion) were relatively stable.
The cost-to-income ratio was 61%, down from 63% in the year-ago period.
In the reported quarter, Barclays recorded credit impairment charges of £374 million ($486.4 million), down 14% year over year.
Pre-tax income was £2.23 billion ($2.90 billion), up 18%.
BCS’ Balance Sheet Solid
Total assets, as of Sept. 30, 2024, were £1,531.1 billion ($2,049.7 billion), down 4% from the end of September 2023.
Total risk-weighted assets decreased marginally from the Sept. 30, 2023, level to £340.4 billion ($455.7 billion) as of Sept. 30, 2024.
As of Sept. 30, 2024, the Common Equity Tier 1 (CET1) ratio was 13.8% compared with 14% as of Sept. 30, 2023.
Barclays’ Guidance
Management expects the loan loss rate to be 50-60 basis points through the cycle, with the 2024 number at the lower end of this range (including the day 1 impact of the Tesco Bank acquisitions).
NII (excluding Barclays Investment Bank and Head Office) is expected to be more than £11 billion in 2024, up from the previous estimation of £11 billion. Of this, Barclays UK is projected to generate NII of £6.5 billion (excluding the impacts of the Tesco Bank acquisition). The outlook is better than the prior NII projection of £6.3 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 on Barclays
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 worrisome.
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).
Earnings Release Dates of Barclays’ Peers
Among Barclays’ peers, HSBC Holdings (HSBC - Free Report) is scheduled to announce third-quarter 2024 results on Oct. 29 and UBS Group AG (UBS - Free Report) is slated to report on Oct. 30.
At present, HSBC carries a Zacks Rank of 3 and UBS has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.