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Barclays (BCS) Earnings and Revenues Increase Y/Y in Q3
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Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). This reflects improvement from net income attributable to ordinary equity holders of £583 million ($792.6 million) recorded in the prior-year quarter.
Results were driven by improvement in trading activities and decline in credit impairment charges. Further, the bank’s balance sheet position remained strong. However, fall in net interest income and higher expenses acted as headwinds.
Revenues Improve, Costs Rise
Net operating income was £4.88 billion ($6.36 billion), up 9% year over year. The increase reflects growth in net fee, commission and other income.
Operating expenses (excluding U.K. bank levy, and litigation and conduct) totaled £3.33 billion ($4.34 billion), increasing 2% from the year-ago quarter.
Cost to income ratio was 67%, up from 65% in the prior-year quarter.
Credit impairment charges plunged 64% from the prior-year quarter to £254 million ($330.9 million).
Pre-tax income was £1.46 billion ($1.90 billion), up from £1.11 billion ($1.51 billion) in the year-ago quarter.
Segmental Performance
Barclays U.K.: Profit before tax was £740 million ($964.1 million), marking an improvement from £661 million ($898.6 million) in the year-ago quarter. Rise in net operating income, partly offset by higher operating expenses, was the primary driver for the segment’s performance.
Barclays International: Profit before tax was £850 million ($1.11 billion), up 30% from the prior-year quarter. The rise was mainly driven by improved performance in consumer, cards and payments division.
Head Office: Loss before tax was £129 million ($168.1 million), improving from loss of £206 million ($280.1 million) in the prior-year period.
Strong Balance Sheet and Capital Ratios
Total assets as of Sep 30, 2018, were £1,170.8 billion ($1,526.5 billion), up nearly 2% sequentially.
As of Sep 30, 2018, Common Equity Tier 1 ratio was 13.2%, up from 13.0% on Jun 30, 2018.
Total risk-weighted assets were £316.2 billion ($412.26 billion) as of Sep 30, 2018.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Operating expenses (excluding litigation and conduct charges) for 2018 are expected to be £13.9 billion. Further, management remains on track to achieve operating expenses in the range of £13.6-£13.9 billion in 2019.
Barclays expects loan impairment for second half 2018 to be higher than first half.
The company intends to pay out a dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.
Our View
Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from the year-ago quarter. Income before income taxes plunged 45.8% year over year to €506 million ($590.9 million).
ItauUnibanco Holding S.A. (ITUB - Free Report) and HSBC Holdings (HSBC - Free Report) are expected to announce results on Oct 29.
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Barclays (BCS) Earnings and Revenues Increase Y/Y in Q3
Barclays (BCS - Free Report) reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). This reflects improvement from net income attributable to ordinary equity holders of £583 million ($792.6 million) recorded in the prior-year quarter.
Results were driven by improvement in trading activities and decline in credit impairment charges. Further, the bank’s balance sheet position remained strong. However, fall in net interest income and higher expenses acted as headwinds.
Revenues Improve, Costs Rise
Net operating income was £4.88 billion ($6.36 billion), up 9% year over year. The increase reflects growth in net fee, commission and other income.
Operating expenses (excluding U.K. bank levy, and litigation and conduct) totaled £3.33 billion ($4.34 billion), increasing 2% from the year-ago quarter.
Cost to income ratio was 67%, up from 65% in the prior-year quarter.
Credit impairment charges plunged 64% from the prior-year quarter to £254 million ($330.9 million).
Pre-tax income was £1.46 billion ($1.90 billion), up from £1.11 billion ($1.51 billion) in the year-ago quarter.
Segmental Performance
Barclays U.K.: Profit before tax was £740 million ($964.1 million), marking an improvement from £661 million ($898.6 million) in the year-ago quarter. Rise in net operating income, partly offset by higher operating expenses, was the primary driver for the segment’s performance.
Barclays International: Profit before tax was £850 million ($1.11 billion), up 30% from the prior-year quarter. The rise was mainly driven by improved performance in consumer, cards and payments division.
Head Office: Loss before tax was £129 million ($168.1 million), improving from loss of £206 million ($280.1 million) in the prior-year period.
Strong Balance Sheet and Capital Ratios
Total assets as of Sep 30, 2018, were £1,170.8 billion ($1,526.5 billion), up nearly 2% sequentially.
As of Sep 30, 2018, Common Equity Tier 1 ratio was 13.2%, up from 13.0% on Jun 30, 2018.
Total risk-weighted assets were £316.2 billion ($412.26 billion) as of Sep 30, 2018.
Outlook
The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020.
Operating expenses (excluding litigation and conduct charges) for 2018 are expected to be £13.9 billion. Further, management remains on track to achieve operating expenses in the range of £13.6-£13.9 billion in 2019.
Barclays expects loan impairment for second half 2018 to be higher than first half.
The company intends to pay out a dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.
Our View
Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.
Barclays PLC Price, Consensus and EPS Surprise
Barclays PLC Price, Consensus and EPS Surprise | 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.
Other Foreign Banks
Deutsche Bank AG (DB - Free Report) reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from the year-ago quarter. Income before income taxes plunged 45.8% year over year to €506 million ($590.9 million).
ItauUnibanco Holding S.A. (ITUB - Free Report) and HSBC Holdings (HSBC - Free Report) are expected to announce results on Oct 29.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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