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Barclays (BCS) Q2 Earnings & Revenues Decline Y/Y, Costs Fall

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  • BCS

Barclays’ BCS second-quarter 2020 net income attributable to ordinary equity holders of £90 million ($111.6 million) represents a decline of 91.3% from the prior-year quarter number.

Shares of Barclays lost almost 4.7% in pre-market trading. However, the full day’s trading session will likely depict a better picture.

Results were primarily hurt by a significant increase in credit impairment charges. Also, the company witnessed a decline in the top line. Nevertheless, lower operating expenses were a tailwind.

Revenues & Expenses Decline

Net operating income was £3.72 billion ($4.61 billion), down 26.6% year over year. The decline was mainly due to a fall in net interest income and higher credit impairment charges.

Operating expenses (excluding litigation and conduct costs) totaled £3.31 billion ($4.11 billion), down 5.5% from the year-ago quarter.

Cost to income ratio was 62%, down from 64% recorded a year ago.

Credit impairment charges increased significantly year over year to £1.62 billion ($2.01 billion).

Pre-tax income was £359 million ($445.3 million), down 76.6% from the year-ago quarter.

Quarterly Segmental Performance

Barclays U.K.: Loss before tax was £127 million ($157.5 million) against profit before tax recorded in the year-ago quarter. A fall in net operating income primarily hurt the segment’s performance.

Barclays International: Profit before tax was £807 million ($1 billion), down 34% year over year. The decline was mainly due to the dismal performance of the consumer, cards and payments division.

Head Office: Loss before tax was £321 million ($398.2 million), wider than the loss incurred in the prior-year quarter.

Strong Balance Sheet & Capital Ratios

Total assets as of Jun 30, 2020, were £1,385.1 billion ($1,707.3 billion), down 4.1% sequentially.

As of Jun 30, 2020, Common Equity Tier 1 ratio was 14.2%, up from 13.4% on Jun 30, 2019.

Total risk-weighted assets were £319 billion ($393.20 billion) as of Jun 30, 2020.

Outlook

Barclays continues to target return on tangible equity of more than 10%.

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 improve in the quarters ahead. However, owing to a tough operating backdrop and the coronavirus outbreak-induced global economic slowdown, revenue growth is expected to continue to be hampered to some extent in the near term.

Barclays PLC Price, Consensus and EPS Surprise

 

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.

Performance & Upcoming Releases of Other Foreign Banks

UBS Group AG UBS reported second-quarter 2020 net profit attributable to shareholders of $1.23 billion, down 11% from $1.39 billion in the prior-year quarter. The performance was impacted by a decline in net fee and commission income (down 4% year over year) along with a rise in expenses. However, higher net interest income (up 36%) was a tailwind.

ICICI Bank’s IBN first-quarter fiscal 2021 (ended Jun 30) net income was INR25.99 billion ($344 million), up 36% from INR19.08 billion ($253 million) in the prior-year period. The net income included coronavirus-related provisions of INR55.50 billion ($735 million). The results were driven by a rise in net interest income, growth in loans and deposits, and lower operating expenses. However, provisions surged, owing to the coronavirus outbreak-related concerns. Further, a decline in non-interest income was a headwind.

HSBC Holdings HSBC is expected to report quarterly results soon.

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